Baoshan Iron and Steel Co Ltd, the listed arm of China's largest steelmaker Shanghai Baosteel Group Corp, posted a 63.3 percent rise in profit last year, mainly thanks to a rally in steel prices.

The Shanghai-listed firm earned nearly 7 billion yuan (US$843 million), or 0.56 yuan per share last year, compared with 4.3 billion yuan, or 0.34 yuan per share a year earlier.

The firm posted a full-year revenue of 44.5 billion yuan, a year-on-year increase of 31.2 percent.

The profit surge was mainly derived from last year's high street prices, an analyst noted.

Steel prices soared 25 percent in 2003 to nearly 4,000 yuan a ton on average while Baoshan Iron and Steel was able to sell their products at 5,000 yuan a ton.

"Since Baoshan Iron and Steel has advanced production technology, its profit margin can be 5 to 10 percentage points higher than the industry's average," said Sun Zhaohui, an analyst with Industrial Securities Co Ltd. "This helped it to post a bigger profit."

Baoshan Iron and Steel expects its revenue this year to hit 46.3 billion yuan. Sun added that steel prices in the country will not fall much and will hover around 4,000 yuan a ton.

Profit margin for the firm's steelmaking business stood at 33.4 percent.

But last year's rise in steel prices doesn't necessarily translate into a sterling performance for all steelmakers.

For instance, profit of Wuhan Steel Processing Co Ltd, the listed arm of China's fourth largest steelmaker, shed 4.47 percent to 569 million yuan.

Baoshan Iron and Steel also benefited from its large production scale, which allows it to have lowered production costs and gives it a better performance in the steelmaking sector, Sun noted.

The firm's strategic cooperation with its downstream users is another reason that boosted its earnings, it said in its annual report.

Baosteel, Baoshan Iron and Steel's parent, and the country's three largest vehicle-making groups, Shanghai Automotive Industry Corp, Jilin Province-based First Automobile Works Group and Hubei Province-based Dongfeng Motor Corp worked jointly to exploit the country's booming vehicle sector last year.

Baoshan Iron and Steel's products are used in the auto, oil pipeline and home appliance sectors, among others.

(Shanghai Daily March 1, 2004)