Baosteel Group Corp saw profit drop by nearly a third last year with higher iron ore costs and shrinking demand in the closing months of 2008.

Profit fell 32 percent to about 23 billion yuan (US$3.36 billion), the Shanghai Securities News reported yesterday, citing an industry meeting. Since October, falling orders from customers like auto makers and ship builders have forced Shanghai-based Baosteel to close six blast furnaces. As a result, the company's output in the fourth quarter plunged around 30 percent.

Other major mills also suffered from falling demand and steel prices. The Wuhan Iron & Steel Group saw gross profit fall 18 percent to 7.6 billion yuan. At one stage, the central Wuhan Province-based mill cut capacity by 28 percent, the report said.

Profit at the newly-formed Shandong Iron & Steel Group tumbled over 50 percent to 3.5 billion yuan in 2008, the report said. The mill lost 2.6 billion yuan in the last two months alone.

China has been announcing a wave of stimulus measures to boost growth. Yesterday, China's Cabinet, the State Council, deliberated and approved a revitalization plan to lend more support to the steel industry which was once booming. The support package includes measures to promote consolidation and upgrade technology.

Baosteel's listed unit, Baoshan Iron & Steel Co, gained 3.43 percent to 5.13 yuan while Wuhan Iron & Steel Co, the unit of Wuhan Group, surged 5.41 percent to 5.85 yuan yesterday.

(Shanghai Daily January 15, 2009)