2010-07-16 17:13

Chinese steelmakers are likely to see a new low in profits in July amid rising iron ore prices and falling steel prices, the Economic Information Daily reported, citing a steel association official.

The official also said that steelmakers will face greater cost pressure in the second half of the year to improve efficiency.

In May, China's 72 large and medium-sized steelmakers made profits of 1.26 billion yuan ($186 million), the first monthly gain in nearly nine months. However, Chinese steel enterprises still posted losses amounting to 2.05 billion yuan for the first five months of the year.

Qi Xiangdong, deputy secretary-general of the China Iron and Steel Association (CISA), said at a recent seminar that steel production costs will hit a historic high this year, with soaring prices of water, electricity, coal, tar and iron ore as well as rising transportation costs. The country's energy-saving and emission-cutting measures also will incur extra costs to steelmakers, Qi said.

Protectionist measures by China's trade partners are making steel exports more difficult, and steel prices are likely to experience large fluctuations amid an unsteady market, he added.

Qi predicted that steel demands will increase by 10 percent this year to about 50 million tons.

Many of the country's steel mills have either partly shut down or shifted their focus to repairs and maintenance instead of production to prevent steel prices from further tumbling, as the country's steel inventory is at a historic high, the paper reported earlier.