Due to weak demand, the price of steel finished products has fallen faster than the decline in raw material prices, leading to a continued decline in the profitability of the steel smelting industry. The industry leader Baoshan Iron & Steel (600019.SH) has also experienced a significant decline in profitability, with a performance drop of over sixty percent in the third quarter.

Tonight, Baoshan Iron & Steel disclosed its third-quarter report, achieving a total operating income of 242.856 billion yuan in the first three quarters, a year-on-year decrease of 4.77%, and a net income of 5.882 billion yuan, a year-on-year decrease of 29.56%. In the third quarter alone, it achieved an operating income of 79.605 billion yuan, a year-on-year decrease of 6.53%, and a net income of 1.338 billion yuan, a year-on-year decrease of 64.77%.

The company states that the main reason for the performance decline is that during the reporting period, the steel price decline exceeded the decline in raw material prices, leading to a continued compression of profit margins. The company's third-quarter sales gross margin dropped from 8.29% in the previous year to 4.30%.

In the steel industry this year, listed companies' overall revenue in the third quarter decreased more than the cost reduction, leading to a year-on-year decline in industry profitability. According to data from the China Iron and Steel Association, in the first three quarters, key statistics showed that steel enterprises had a cumulative operating income of 4.54 trillion yuan, a year-on-year decline of 6.87%; operating costs were 4.31 trillion yuan, a year-on-year decline of 6.14%; total profits were 28.977 billion yuan, a year-on-year decline of 56.39%; the average profit margin was 0.64%, a year-on-year decrease of 0.72 percentage points. Baoshan Iron & Steel's various product prices dropped in the third quarter, including the average selling price of plate and strip products at 4,277 yuan/ton, a 7.18% decrease compared to the same period last year.

In addition, the decrease in steel production and sales volume, as well as the asset impairment, have also had a certain impact on the company's performance in terms of the changes in operational and financial data mentioned above.

According to the company's major operational data announcement for the third quarter, the company produced 12.558 million tons of iron, which is approximately 0.197 million tons less than the same period last year; produced 13.304 million tons of steel, approximately 0.569 million tons less than the same period last year; and sold 12.991 million tons of commodity billets, approximately 0.414 million tons less than the same period last year. Both plate and strip products, as well as tube products, saw a decline in production and sales volume.

According to the company's board of directors' resolution, the company made multiple asset impairment provisions at the end of the third quarter. These provisions include a bad debt balance of 34.5256 million yuan, a valuation allowance for inventory of 0.453 billion yuan, an impairment provision for fixed assets of 51.9096 million yuan, and an impairment provision for other non-current assets of 52.2177 million yuan.

In the situation of intensified competition in the mid-to-low-end product market, Baoshan Iron & Steel has increased its efforts to develop high-end products and overseas markets in the first three quarters. The sales volume of high value-added '1+1+N' products in the first 3 quarters was 22.55 million tons, an increase of 2.23 million tons year-on-year, with oriented silicon steel sales volume increasing by 27.5% year-on-year; the export contract signing volume for the first 3 quarters was 4.66 million tons, with the export sales volume reaching a historical high.

Under the overall competitive landscape of the industry, as of now, the listed companies in the steel smelting industry that have disclosed their performance have seen varying degrees of decline in performance in the third quarter. Companies in the specialty steel industry, with strong profitability, have also not been immune, with Citic Pacific Special Steel Group (000708.SZ) seeing a 1.111 billion profit in the third quarter, a 16.77% year-on-year decrease; Nanjing Iron & Steel (600282.SH) saw a profit of 0.52 billion in the third quarter, a 23.06% year-on-year decrease. Meanwhile, some steel smelting enterprises with a large proportion of general steel have experienced significant losses, with Sansteel Minguang (002110.SZ) recording a loss of 1.095 billion yuan in the third quarter, and Xinjiang Ba Yi Iron & Steel (600581.SH) recording a loss of 0.725 billion yuan in the third quarter, showing a decrease in profitability year-on-year.