April 28, 2020 / 10:19 AM / a month ago

China's Baosteel reports 43.6% drop in profit as pandemic hits demand

* Q1 net profit falls to 1.5 bln yuan

* 2019 net profit down 42.1% at 12.4 bln yuan

* Warns coronavirus to hit H2 profit

By Min Zhang and Tom Daly

BEIJING, April 28 (Reuters) - Baoshan Iron & Steel Co Ltd , China’s top listed steelmaker, reported a 43.6% plunge in first-quarter net profit on Tuesday and warned of a big first-half drop citing the coronavirus pandemic.

Known as Baosteel, its January-March net income fell to 1.54 billion yuan ($217 million) from 2.73 billion a year earlier, a filing to the Shanghai Stock Exchange showed.

“Due to the extended Spring Festival holidays and spreading new coronavirus pandemic at home and abroad, domestic demand for steel products dropped obviously,” Baosteel said in the filing, adding that steady iron ore prices also dragged down profit at its mills.

The benchmark price index of iron ore with 62% iron content edged up to $89.0 per tonne in the first quarter from $88.61 in the fourth quarter of 2019, according to S&P Global Platts.

In the first quarter Baosteel produced 11.1 million tonnes of iron and 11.8 million tonnes of steel.

The company expected demand for steel sheet to further drop in the second quarter on low utilisation rates at downstream sectors as well as high inventory levels, which could narrow its procurement and sales price spread and hit its first-half earnings.

“(We) will further expand in the market, strengthen the linkage between production and sales, and tap potential for cost cuts... to lower the impact on our operation brought by the coronavirus,” it said.

NET PROFIT DOWN IN 2019

For 2019, Baosteel’s net profit fell 42.1% to 12.4 billion yuan, it said in a separate filing on Tuesday, attributing the decline to a soft steel market and surging raw material prices.

Iron ore supply was disrupted in 2019 due to the tailings dam disaster at Vale SA and a tropical cyclone in west Australia, which sent benchmark iron ore futures prices on the Dalian Commodity Exchange to a record high in July.

Profits were also pressured by high supply levels and sluggish demand for vehicles and containers, the company said.

Vehicle sales in China fell 8.2% in 2019, data from the country’s biggest auto industry association showed, and plunged by 42.4% in the first quarter.

Baosteel produced 46.87 tonnes of steel products in 2019 and shipped 3.62 million tonnes to other countries, it said.

It aims to produce 43.43 million tonnes of iron and 46.36 million tonnes of steel in 2020, and to achieve a total income of 270.4 billion yuan.

$1 = 7.0859 Chinese yuan renminbi Reporting by Min Zhang and Tom Daly; editing by Jason Neely

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