Steelmakers post 4.3b yuan in losses

As of Tuesday, 16 out of the 56 listed steel companies had released their results for 2012, showing aggregated losses of 4.3 billion yuan ($682 million), despite a recovery in fourth-quarter demand.

Angang Steel Co Ltd, the listed arm of Anshan Iron and Steel Group Corp, led loss-making companies by booking a 4.16 billion yuan loss for 2012. The company now carries the ST tag on its shares traded on the Shenzhen Stock Exchange after posting losses for two years in a row.

Shandong Iron and Steel Co Ltd reported a net loss of 3.8 billion yuan for 2012, while the Anhui-based Magang (Group) Holding Co Ltd saw a 3.86 billion yuan loss due to slumping downstream demand and soaring operating costs.

Analysts have a bearish outlook for domestic steelmakers in 2013, as overcapacity and weak downstream demand are not expected to ease off in the short term.

"Real estate, infrastructure construction, machinery and shipbuilding are the major downstream industries for steel firms, and all of them ran into difficulties in 2012," said Yang Hua, an analyst at Mysteel.com, a steel industry information provider.

"The lackluster downstream demand also fixed steel prices at low levels, but making the situation worse is the steady increase of raw material prices," said Qiu Yuecheng, an analyst from an e-commerce platform 96369.net.

The country's 80 major steel companies posted 1.58 billion yuan in profits in 2012, tumbling 98.2 percent year-on-year, according to data from the Ministry of Industry and Information Technology.

The sales margin of steel companies was merely 0.04 percent in 2012. That figure used to stay above 2 percent, and it was 8 percent in 2004.

Overcapacity, which is regarded as the major reason behind the losses, is spreading from low-end to high-end products after many small mills started producing high-end goods in a bid to get higher profits, said Yang.