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Baosteel facing high cost and low price period
It is reported that Baoshan Iron & Steel Co Ltd, a listed unit of Shanghai Baosteel Group, has entered into the extremely arduous period featured with high cost and low sales price in the fourth quarter from the high-cost and high sales price phase in the previous trimester.

And the mill expects the steel market to rebound in the Q2 of next year following the "low-cost and low-sales price" phase in the first one.
Guoyuan Securities report that in September, 23rd large and medium sized steel makers have suffered loss, accounting for 32.4% of the total, and the losses came to CNY 1.154 billion in the first 9 months up by 18.06% YoY. And the steel sector is set to face whole industry deficit in the fourth quarter.

Due to the losses in Q3 stainless steel, although the Q3 net profits growth approach to the average increase of 20% in steel industry, yet is far below the market expectation. In Q3, the company's preparation for stainless steel and raw materials price fall registers at CNY 0.99 billion with assets impairment soaring to CNY 0.93 billion dragging down the seasonal EPS by CNY 0.04. The mill is set to face whole deficit in carbon steel, stainless steel and special steel businesses in the last quarter since the mill has cut the prices of its Dec supplies by CNY 800 per tonne to CNY 1,000 per tonne on the basis of that in November and the high input costs.

On the costs front, coke instead of iron ore, has become the major driving force for input costs rise in Q3. Coke price has experienced a rapid fall of CNY 400 per tonne to CNY 500 per tonne in September and another CNY 300 per tonne to CNY 400 per tonne drop in early October. However, mills' production costs remains high in Q4 since they need 1 to 2 months to digest the coke stocks purchased at high prices in earlier period.

Currently, price for Indian spot ore import has fallen to USD 65 per tonne, far below the USD 89 per tonne of Australian contract ore price with same grade. Meanwhile, the sales price of home-made ore concentrate is lower than that of the imported ore.

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