| Baosteel Boosts Margin as Nickel Prices Increase |
| Wednesday,May 23,2007 Posted: 06:59 BJT(2259 GMT) xinhua |
BAOSHAN Iron & Steel Co, China's biggest steelmaker, has improved stainless steel profitability this quarter by producing more nickel-free products. "We have significant improvement in profit margins for stainless steel this quarter as we just started to make more nickel-free products while keeping existing production of normal grades," said Wang Chengxue, assistant to the president of Baoshan's stainless steel unit. The nickel price has climbed sevenfold in the past five years, driving Baoshan and rival companies to make stainless steel with higher chromium and manganese contents, or without any nickel, Bloomberg News reported. Baoshan's total gross margin, the percentage of sales left after production costs, fell to 16.3 percent in the first quarter, the lowest in a year, as stainless steel profitability declined. "If nickel prices stay at high levels for a longer time, more stainless steel consumers will be forced to try using non-nickel stainless steel, or use plastic or other materials," said Xu Aidong, an analyst at Beijing Antaike Information Development Co. The company's shares, which earlier rose as much as 3.8 percent, closed down 0.1 percent at 13 yuan (US$1.69) on the Shanghai Stock Exchange. The stock has advanced 50 percent so far this year and jumped to a record 13.55 yuan intraday on May 14. Baoshan Steel will increase nickel-free production to boost its total output of stainless steel slab by 9.1 percent to 1.2 million tons this year from last year. The company opened a plant in 2005 giving it stainless steel capacity of 1.5 million tons. Nickel for three-month delivery on the LME rose to a record high of US$51,800 a metric ton on May 9. The metal closed at US$50,400 a ton on May 18. Baoshan said it is studying production of duplex stainless steel, a mixture of ferritic and standard stainless steel that is stronger and uses less nickel. "It's very difficult, though, to increase the percentage of lower-nickel grades within a short period because the job demands experienced technicians," Wang said yesterday. The level of its ferritic-grade output has increased to 40 percent from a little more than 30 percent last year. The company wants to boost that to about 50 percent in the next three to five years, Wang said. China, which became the world's biggest stainless steelmaker last year, could increase production 40 percent to 50 percent in 2007, Chai Zhiyong, president of Shanxi Taigang Stainless Steel Co, said in Kyoto yesterday. |
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