Baoshan Iron and Steel Co, China's largest listed steel maker, plans to sell its loss-making stainless steel and special steel assets to its parent, Baosteel Group Corp, that will contribute to its profitability.

The sale of the assets, which are worth 45.2 billion yuan (US$7.2 billion), will help Baoshan Steel achieve a gain of 9.58 billion yuan, excluding taxes, according to a filing to the Shanghai Stock Exchange yesterday.

The disposal comes as the Chinese steel industry is facing low profit margin as they are squeezed by high costs of raw materials, weaker demand and an oversupply in capacity.

The assets incurred a loss of 1.54 billion yuan in 2011, the Shanghai-based mill said.

"The company will focus on its carbon steel business on completion of the transaction," it said.

Baoshan Steel said its annual steel output will fall from 26 million tons to 22 million tons after the sale and it will also slash 8,000 workers from its workforce.

The listed unit may use the money from the sale to fund a major steel project in Zhanjiang in Guangdong Province, China International Capital Corp analysts Luo Wei and Ding Yue said in a note yesterday.

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