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

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.

Domestic market price witness some rebound. On Shanghai market, 1.0mm CR sheet by Anshan steel goes at CNY 4530 per tonne up by CNY 70 per tonne from last Friday; 1.2mm to 2.0mm material at CNY 4430 per tonne an increase of CNY 50 per tonne. While that for 1.0 CR coil by Maanshan steel rebounded by CNY 130 per tonne to CNY 4180 per tonne.

Export offer for DC01 1.0mm CRC goes at USD 650 per tonne to CNY 700 per tonne FOB which compares with USD 700 per tonne FOB last week.

In Shanghai, HRB335 20mm rebar is being quoted at CNY 3320 per tonne to CNY 3330 per tonne; HRB400 grade material is being quoted at CNY 3290 per tonne to CNY 3310 per tonne up by CNY 150 per tonne from last Friday. That for commercial wire rod jumps by CNY 250 per tonne to CNY 3350 per tonne to CNY 3360 per tonne and that for hi-speed material saw a great increase of CNY 190 per tonne to CNY 3380 per tonne.

Prevailing export offers remain at about USD 600 per tonne FOB and there are also lower levels between USD 580 per tonne to CNY 590 per tonne FOB. Quotation for wire rod goes at USD 610 per tonne to CNY 620 per tonne FOB.