China's car output slows after 50% gain, Baosteel says

Baoshan Iron & Steel Co. (Baosteel), the biggest supplier of automotive steel in China, said car production is slowing after a more than 50 percent gain in the first quarter.

Steel demand from automakers in China has dropped "a bit," General Manager Ma Guoqiang told investors in an online conference today. Baoshan Steel's order books for all its major products, including automotive sheets, are full, he said.

A slowdown in auto demand in China, the world's biggest vehicle market, may intensify competition for market share by Toyota Motor Corp., Volkswagen AG and Nissan Motor Co. Baoshan Steel has forecast first-half profit will jump 6- to 10-fold as prices and demand recovered with the easing of the global recession. "The slowdown in the auto industry is a correction to earlier gains which were too fast," Ma said. "The most difficult period is over, judging from the economy and steel demand."

Baosteel Group Corp., the parent of Shanghai-based Baoshan, said in November 2008 that it faced its "most difficult" period since its founding 30 years ago because of the global crisis.

Profit margins on automotive steel sheets have been "very good" for Baoshan Steel since the third quarter of 2009, Vice President Chen Ying said at the same conference today.

Baoshan Steel, China's biggest publicly traded mill, has raised cold-rolled coil prices by 21 percent and hot-rolled coil by 30 percent this year, researcher UC361.com analyst Hu Yanping said. Cold-rolled is used in automobiles and appliances, and hot-rolled is used to make cold-rolled coil.

Chinese steel prices have fallen 2.2 percent from an 18- month high of 4,698 yuan ($688) a metric ton on April 15 amid concerns government measures on the property market will curb demand, according to Beijing Antaike Information Development Co.

"The price correction is normal," Ma said. "Good demand and higher raw-material costs will limit the price drops. China's curbs on the property market are unlikely to hurt our earnings as we have little product exposure to construction."