Baoshan Iron and Steel Co, the listed unit of China’s largest steel mill, said on Thursday it would be hard to achieve a 2009 net profit at this year’s level as it confronts weak demand.

The comments came after Baosteel, the world’s fifth-largest steelmaker, late on Wednesday reported a weaker-than-exected 19.2 percent rise in third-quarter net profit and said key product areas would see losses in the fourth quarter, due to falling domestic steel prices and high raw material costs.

“It will be very difficult for Baosteel to maintain its 2009 earnings at the same level as this year’s, as a medium-term correction has begun in the steel industry,” Baosteel Board Secretary Chen Ying told an online briefing.

Several analysts lowered their forecasts for Baosteel’s 2008 and 2009 earnings after the third-quarter announcement.

Shanghai-based Orient Securities said on Thursday in a note that it expected the company’s earnings per share at 0.68 yuan in 2008 and 0.41 yuan in 2009.

The forecast for 2008 suggested Baosteel could see a loss of around 500 million yuan ($73.13 million) in the fourth quarter.

The global economic slowdown, coupled with a domestic housing slump, has hit China’s domestic demand and exports.

Top steel mills have cut output by up to 20 percent partly due to hefty inventories that are losing value and hurting their cash positions.

Baosteel now has inventories worth about 52.1 billion yuan, Chen said, including 17.7 billion yuan of raw materials and 16.3 billion yuan of finished products.

Sources close to Baosteel Group, the listed unit’s parent company, said earlier this month that the group would cut production by about 1 million tonnes in conjunction with an overhaul of a major blast furnace.

Chen did not comment directly on output cuts, however, saying only that the company would schedule its production in the remainder of the year in accordance with orders it received.

Cui Jian, vice president of Baosteel, told the briefing that Baosteel’s state-owned parent was studying a possible increase in its shareholding in the listed unit but the company itself was not considering buying back its shares.

Baosteel’s Shanghai-listed shares were up 0.22 percent at 4.61 yuan in afternoon trade, underperforming a 2.3 percent rise in the benchmark Shanghai Composite Index

Baoshan Iron and Steel Co, the listed unit of China’s largest steel maker, said on Wednesday that it expected losses on its carbon steel products in the fourth quarter of this year due to slumping prices.

The company also said its stainless steel products, which were in the red in the third quarter ended in September, would continue to post losses in the fourth quarter.

The global economic slowdown and a domestic housing slump have hit both China’s steel demand and its exports. Top steel mills have cut output by up to one-fifth and lowered their steel prices.

The China Iron and Steel Association stated recently that the country’s steel sector suffered overall losses this month and predicted that trend would continue in the last two months of this year.

According to Mr Meng Xinyi vice secretary of Party committee of Xingcheng Special Steel, member of CITIC, the company’s export has decreased to monthly 20,000 tons from the highest 40,000 tonnes of this year nearly a downslide of 50%.
 
 He said that “We are cutting production now with the range between 5% to 10% based on the orders’ size. He added that after two or three months when we assimilate the highly-priced resource bought earlier, we can use the low-priced goods. By that time we will see apparent drop in purchasing cost.

It is reported that there have been few construction steel exports in October on substantial price drop and weak overseas demand. Steel mills indicate that there probably would be a 70% decrease in export tonnage for November shipment.
 
 Domestic market prices continue to see some rebound. In Shanghai, HRB335 20mm rebar is being quoted at CNY 3420 per tonne to CNY 3430 per tonne; HRB400 grade material is being quoted at CNY 3510 per tonne to CNY 3540 per tonne up by CNY 200 per tonne from last Friday. That for commercial wire rod jumps by CNY 70 per tonne to CNY 3410 per tonne to CNY 3420 per tonne and that for hi-speed material saw an increase of CNY 60 per tonne to CNY 3430 per tonne to CNY 3450 per tonne.
 
 Prevailing export offer goes at USD 580 per tonne to CNY 600 per tonne FOB and there are also lower levels at USD 500 per tonne to CNY 550 per tonne FOB. Some are even quoting at USD 480 per tonne to CNY 500 per tonne FOB, however there is still not much order. Official quotations for Wire rod is about USD 600 per tonne FOB and real transaction price is negotiable.