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Roads for a number of Chinese steel makers seeking domestic stock market listings appear to be rocky as a result of the government's macroeconomic policies, despite their bumper profits, according to an industry organization.
These companies include Xingtai Iron and Steel Co in Hebei Province, Kunming Iron and Steel Co in Yunnan Province, Sanming Iron and Steel Co in Fujian Province and Tonghua Iron and Steel Co in Jilin Province, said sources from the China Iron and Steel Association.
The Xingtai steel firm's plan to go public in Shanghai had been initially approved by China Securities Regulatory Commission (CSRC) at the end of last year.
"However, they face additional difficulties because of the government's macroeconomic controls on the steel sector," said Wang Chengrong, an official from the steel association.
For example, the price per share of Jinan Iron and Steel Co in Shandong Province surprisingly tumbled below its issue price of 6.36 yuan (US$0.77) on its first trading day at the end of June in the Shanghai Stock Exchange.
"Those companies seeking listings should consider carefully how to deal with the situation," Wang said.
The steel sector is the one the government labeled as "most overheated," alongside aluminium and cement.
The government started to tame overheating investment in the steel sector to prevent excessive production capacity and violent fluctuations in domestic steel prices.
Investment in the sector grew by 54.7 percent year-on-year to 84.8 billion yuan (US$10.2 billion) in the first six months of this year.
The growth was down from a whopping 107.2 percent during the first quarter.
Steel output in China rose by 21.09 percent to 124.75 million tons during the first half of this year.
The increase rate dipped by 5.29 percentage points from that in the first quarter.
The first-half-year profits of China's 66 key steel makers surged by 83.08 percent to 37.62 billion yuan (US$4.54 billion).
The Xingtai steel company, which reported 260 million yuan (US$31.4 million) in profits during the first half of this year, intends to shift its listing to Hong Kong because of delays on the mainland, according to industry sources.
However, Qu Li, a steel analyst with China Securities Co, said that the government's macroeconomic controls on the steel sector do not have a direct impact on that company's listing plans.
"It is a matter for the CSRC. Many companies in other sectors are also looking forward to going public. They have to queue up for CSRC's final approval," Qu said.
There are 34 listed Chinese steel makers with three also issuing stocks in Hong Kong - Angang New Iron and Steel Co in Liaoning Province, Ma'anshan Iron and Steel Co in Anhui Province and Chongqing Iron and Steel Co in Chongqing Municipality.
By the end of last year, 33 of these listed firms had total assets of 284.5 billion yuan (US$34.4 billion), which accounted for 31 percent of the total assets of China's key steel makers and 37.3 percent of their parent firms, according to statistics from the steel association.
"This leaves great room for domestic steel makers to restructure their State-owned assets and go public in stock markets," Wang said, adding moves have decelerated over the past two years.
Only two steel makers in China were listed in 2002, and one last year.
The 33 listed steel companies had a total of 47.8 billion shares and raised 51.93 billion yuan (US$6.27 billion) by the end of last year.
They reaped net profits of 21.9 billion yuan (US$2.6 billion) last year, including 6.9 billion yuan (US$833.3 million) from Baoshan Iron and Steel Co - China's biggest steel maker based in Shanghai, statistics show.
The 33 listed firms and their parent companies produced 127.16 million tons of steel last year, controlling 57.8 percent of total steel output in China.
The Jinan steel firm ended at 6.17 yuan (US$0.75) per share yesterday, up 4 percent.
(China Daily August 11, 2004)
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