Baoshan Iron & Steel Co said earnings will be significantly improved in the second half of the year from the first six months as market conditions improve, according to President Ma Guoqiang.

Steel prices could probably rise after having undergone a correction as the demand fundamentals are still good and the international market is also recovering, Ma told investors during an online briefing yesterday after the steel mill posted a sharp decline in interim profit.

Domestic steel prices have fallen in the past three weeks following a rise over 17 weeks that was helped by the government stimulus package.

Ma said orders are good after the company raised prices for September delivery.

"In the short term, it's not very likely that demand would slump significantly," he said, adding the property market will play a key role in helping steel demand to grow and the Chinese economy overall is set to rise in the second half.

But he said the government needs to take more effective measures to limit capacity expansion in the steel sector.

The State Council, China's Cabinet, last week said it will curb overcapacity and excessive investment in several industries, including steel, after the 4 trillion yuan (US$586 billion) stimulus package spurred firms to lift industrial output in certain sectors.

Baosteel reported over the weekend its first-half profit plunged 93 percent to 669 million yuan as a slowing economy eroded demand from auto makers and ship builders.

Shanxi Securities analyst Liu Junqing said Baosteel's profit could fall sharply in the current quarter from a year ago, but it would be an improvement from the first half as iron ore costs have fallen and steel prices have risen.

(Shanghai Daily September 1, 2009)