OREANDA-NEWS. September 14, 2012. Facing difficulties and challenges during meager profit era of iron and steel industry, Baosteel sticked to differentiation competitive strategy in the first half of the year, and carried on important working around the product management, cost improvement and promotion of management system capability, so as to promote product structure optimization and management system capability improvement, realize continuous improvement of the cost, reported the press-centre of Baosteel. 

In the first half of the year, Baosteel sold 11.855 million tons commodity blank material, which is exclusively 5.54 million tons more than the product sales, achieving gross revenue 98.1 billion RMB; total combined profit 12.33 billion RMB, increased 81.73% year on year, which mainly benefits from 9.09 billion RMB income for selling related assets of Stainless and Special Steel Business Units. Though it is impacted by the reduce of market demand, Baosteel still realized 2.72 billion RMB operating profit and keeps the best performance in the industry.

The report states that global economic resurgence slowed further in the first half of the year, pressure from sustained descending of economic growth of China increased, inflation became lower but still remained high. For new invested and established capacity increased gradually, and the market was previously expected to be better, raw steel yield of China has increased month by month since the beginning of the year, and reached a new high of daily capacity in April, 2.019 million tons, meanwhile, there is more intense competition in the same product market. In the first half of the year, steel market price maintains low in general.

Except the car steel, yield of all other steel downstream industries has negative growth, contradiction between steel supply and demand was obvious. Steel price continued to fall since the middle of April, prices of many steel grades reached a new low since last year, stocks of steel plant also increased obviously in the same period . Compared with the sustained low price operation of the steel, price of iron ore in the first half of the year was relatively strong, price of crude fuel, such as coking coal and steel scrap, fell slightly after rose. However, it didn't relieve the cost pressure of the steel production company. Benefit of the steel industry in the first half of the year still stayed low in the first half of the year, the overall performance declined significantly year on year.

Look into the future, Baosteel forecasts that viewing from the external environment, the global economic recovery is arduous and tortuous, European debt crisis shocks repeatedly, and slow down signal of the global economy is obvious. Pressure from descending of domestic economy is increasing, growth rate of yield of downstream steel industries is slowing down, including car, household appliance and machinery, etc. Steel price in the domestic market is difficult to recover in the third quarter, imported iron ore price of the same period trends down, but the company will still be under the big pressure of cost and profit.

Viewing from the internal production and management, the company will face the pressure and challenge of the three main aspects in the next half of the year: First, annual overhaul and periodical repair of the main production lines are very concentrated, climbing and improvement of profitability of the new line shall be focused continuously; Second, product quality and user's satisfaction shall be kept and improved further; Third, control of energy and environmental protection indexes shall be strengthened, so as to achieve the company's target of energy saving and emission reduction.

As a result, Baosteel will focus on the impact from slowdown of downstream market demand, go deep and carry forward the collaboration mode of production, marketing and research, improve the competitiveness of the main products; optimize the stock management of steel product, improve the stock turnover efficiency; further perfect the customer-centric operation system; carry forward the construction and implementation of technical service system for the user, so as to improve the user's satisfaction; detailing each item of measures of cost improvement and cost efficiency, strengthen centralized control of sales management cost, strive to reduce the cost level; implement the principle of environmental management, deeply dig the potential of energy management, make sure to finish the target of energy saving and emission reduction.