China's steelmakers may face headwinds in the profitability in the last quarter amid growing cost pressure, said a key steel maker based in southern China's Guangdong province.

Guangdong Zhongnan Iron & Steel Co., Ltd. said at a recent earnings briefing that raw material prices have risen more than steel prices, squeezing industry profits, when asked about whether they could maintain revenue and profit growth rates going forward. As such, the outlook for the fourth quarter is difficult to be optimistic about.

For the first three quarters of 2023, Zhongnan Steel achieved operating revenue of 29.73 billion yuan, an increase of 8.66% year on year. Net profit grew 84.10% year on year.

The company will focus on maximizing efficiency and profits by organizing production according to the principles of "producing based on orders, output based on margins, revenue based on profits, and profits based on cash flow".

It will also continue optimizing its product mix and increasing the market share of high-end specialty varieties.

Demand from traditional sectors may remain constrained by the property sector in the short-term. However, new materials, infrastructure, sectors and business models driven by national policies could unleash new demand.

Zhongnan Steel is a subsidiary of Baowu Steel Group, with an annual production capacity of 8 million tonnes. It is a major steel producer based in Guangdong.

(Writing by Alex Guo  Editing by Emma Yang)
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