Profits of China’s iron and steel industry plunged 49 4% from a year earlier to RMB 52 2bn (US$8.19bn) in the first five months of 2012, according to the NDRC.

Steel mills and downstream processing reported a 68 2% decline y-o-y in the January-May period, profit totalling RMB 20.1bn ($3.15bn). China’s steelmakers are experiencing their most difficult time in a decade as their profits are squeezed by weak demand amid a prolonged global economic slowdown and the high cost of iron ore. Major steel mills in the country are substantially lowering their profit forecasts for the rest of 2012 in view of their meagre performance in the first half of the year.

Wuhan Iron and Steel Group (Wusteel) has nearly halved its 2012 profit target to RMB 1 6bn ($251.1M), dragged down by sluggish demand. Deng Qilin, general manager of Wusteel, said the company has shifted part of its resources to build factories in south China ’s Guangxi Zhuang Autonomous Region and to acquired mines and other assets overseas to counter the slowdown.

Following Wusteel’s step, Xinjiang Bayi Iron & Steel, a subsidiary of the Baosteel Group, reported its unaudited net profits dropping 51.13% year on year to RMB 190.24M ($29.86M) in the first six months 2012. This was despite sales revenues posting a slight increase of 0.83% to RMB 14.14bn ($2.22bn) in the first half 2012. The Urumqi-based company is the largest iron and steel producer in the Xinjiang Uygur Autonomous Region in the north-west of the country. The company was acquired by Baosteel in 2007.

Hebei Iron and Steel Co Ltd estimated a net profit for the first half of 2012 at RMB 98.8M to 39.5M down 60-90% from a year earlier. The steelmaker attributes the decline in profits to the high prices of raw materials, slowing demand from downstream sectors and the sharp fall in sales prices of its products.

Source: China Metals e-mail infochn@public.bta.net.cn