As the global financial crisis continues, its impact on the real economy is increasing. The global economic slowdown and the resulting weakening of external demand are causing temporary difficulties for domestic listed companies. After Toys, textiles, and other industries were trapped in operational difficulties, listed companies such as steel and nonferrous metals began to feel the impact of macroeconomic changes. Today, Sansteel Dawning (002110) and China Steel Tianyuan (002057) have overcome difficulties due to rapid market changes and through production cuts, shutdowns and other measures.
Sansteel Dawning announced today that due to the impact of the macroeconomic recession, steel market demand has been severely reduced since the third quarter, and steel prices have continued to fall sharply. The company’s average selling price of steel in September was 18% lower than that in June. The current average selling price was 26% lower than that in September, while the price cut of upstream raw material was limited, and the high-priced raw material of the company’s inventory was not digested yet. This led to a serious inversion of costs and selling prices, and a sharp decline in corporate profits. It is expected that the downturn in the steel market will continue until the end of the year.
To cope with the current market difficulties, the company plans to adjust its production plan, control production pace in the fourth quarter, carry out appropriate limited production, and arrange year-end maintenance in advance. The output of steel products will decline compared with the plan. According to the forecast of the company’s financial department, the company’s net profit attributable to the parent company in 2008 is expected to decrease by 50%-80% compared with the same period of last year.
The reduction in output of Sansteel's dawn is only a microcosm of the current status of the steel industry. In fact, under the background of economic contraction, due to the dual impact of the lack of downstream demand and relative surplus of production capacity, steel prices have rapidly entered the downward path since October. According to the disclosure figures of the Ministry of Commerce on October 14, the price of steel in China fell by 6.2% in mid-October.
Under the pressure of huge losses, domestic iron and steel companies have cut production or stopped production in order to keep prices and stabilize the market and deal with stocks of steel mills and traders. Hebei Iron and Steel, Shougang, Shandong Iron and Steel, and Anyang four major steel mills announced a 20% cut in October. It can be foreseen that, as the price of steel products continues to slump, the measure of “cutting down production insured prices†will increasingly be adopted by iron and steel companies as a magic weapon to survive the “winterâ€.
The recent plummeting electrolytic manganese market has also caused a tremendous impact on such companies. Today, China Iron and Steel Tianyuan (002057), a listed company in this industry, also announced its suspension of production of electrolytic manganese due to environmental changes. The company stated that due to the large fluctuations in raw material prices and the uncertain market conditions, China National Steel Tianyuan suspended the production of electrolytic manganese from Tongling Manganese Branch from April this year and considered resuming production when the timing improves, but as of now and It is predicted that the market situation will remain severe in March 2009. Therefore, China National Iron and Steel Tianyuan decided to stop production of electrolytic manganese production line until March 2009, and then make a decision based on market conditions.
China Steel Tianyuan stated that although the shutdown of the electrolytic manganese production line will have little impact on Tianyuan Steel’s revenue, due to the significant impact of Tongling’s continuing operations capabilities, the Tongling’s related assets are expected to be significantly reduced. This will cause the company to lose money in 2008.
Therefore, the company plans to hire a professional valuation agency to conduct the assessment before the end of the year, and make corresponding allowance for impairment at the end of the year. China Steel Tianyuan expects to make provision for impairment of RMB 5-8 million.
According to investigations by relevant agencies, most electrolysis manufacturers are currently in a state of reduced production. It is expected that the domestic enterprises with reduced production of electrolytic manganese will quickly reach 1/3.
Sansteel Dawning announced today that due to the impact of the macroeconomic recession, steel market demand has been severely reduced since the third quarter, and steel prices have continued to fall sharply. The company’s average selling price of steel in September was 18% lower than that in June. The current average selling price was 26% lower than that in September, while the price cut of upstream raw material was limited, and the high-priced raw material of the company’s inventory was not digested yet. This led to a serious inversion of costs and selling prices, and a sharp decline in corporate profits. It is expected that the downturn in the steel market will continue until the end of the year.
To cope with the current market difficulties, the company plans to adjust its production plan, control production pace in the fourth quarter, carry out appropriate limited production, and arrange year-end maintenance in advance. The output of steel products will decline compared with the plan. According to the forecast of the company’s financial department, the company’s net profit attributable to the parent company in 2008 is expected to decrease by 50%-80% compared with the same period of last year.
The reduction in output of Sansteel's dawn is only a microcosm of the current status of the steel industry. In fact, under the background of economic contraction, due to the dual impact of the lack of downstream demand and relative surplus of production capacity, steel prices have rapidly entered the downward path since October. According to the disclosure figures of the Ministry of Commerce on October 14, the price of steel in China fell by 6.2% in mid-October.
Under the pressure of huge losses, domestic iron and steel companies have cut production or stopped production in order to keep prices and stabilize the market and deal with stocks of steel mills and traders. Hebei Iron and Steel, Shougang, Shandong Iron and Steel, and Anyang four major steel mills announced a 20% cut in October. It can be foreseen that, as the price of steel products continues to slump, the measure of “cutting down production insured prices†will increasingly be adopted by iron and steel companies as a magic weapon to survive the “winterâ€.
The recent plummeting electrolytic manganese market has also caused a tremendous impact on such companies. Today, China Iron and Steel Tianyuan (002057), a listed company in this industry, also announced its suspension of production of electrolytic manganese due to environmental changes. The company stated that due to the large fluctuations in raw material prices and the uncertain market conditions, China National Steel Tianyuan suspended the production of electrolytic manganese from Tongling Manganese Branch from April this year and considered resuming production when the timing improves, but as of now and It is predicted that the market situation will remain severe in March 2009. Therefore, China National Iron and Steel Tianyuan decided to stop production of electrolytic manganese production line until March 2009, and then make a decision based on market conditions.
China Steel Tianyuan stated that although the shutdown of the electrolytic manganese production line will have little impact on Tianyuan Steel’s revenue, due to the significant impact of Tongling’s continuing operations capabilities, the Tongling’s related assets are expected to be significantly reduced. This will cause the company to lose money in 2008.
Therefore, the company plans to hire a professional valuation agency to conduct the assessment before the end of the year, and make corresponding allowance for impairment at the end of the year. China Steel Tianyuan expects to make provision for impairment of RMB 5-8 million.
According to investigations by relevant agencies, most electrolysis manufacturers are currently in a state of reduced production. It is expected that the domestic enterprises with reduced production of electrolytic manganese will quickly reach 1/3.
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