Profits At China's Biggest Steelmaker Fall 53%—And The Worst Is Yet To Come

china steel

Photo: AP

Another day, another story of Chinese corporate profits getting decimated.This time it’s Baosteel, which is China’s largest steelmaker.

According to Reuters, first half profits fell 53%, and the company says that Q3 is going to be the worst quarter yet.

What we’re seeing again and again is surging costs hammering margins, even when raw material prices have not been particularly bad.

The chairman of Baosteel’s board of directors, He Wenbo, said at the same online conference that steel prices were unlikely to stage any recovery in the second half of 2012, adding that despite the rapid fall in iron ore prices, domestic steel firms were still facing “huge cost pressures”.

This is a fabulous lesson in why GDP growth does not equal stock market performance.

Despite overall growth, China’s massive investment boom has left shareholders with pitiful return on equity, at least at the moment.

And the fact that not even the collapse in iron ore prices is fascinating.

We put up this chart about collapsing iron ore prices last week.

Iron Ore

Photo: Business Insider

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