Beijing removed export rebates on most types of steel products while reducing rebates on high value-added steel products to 5 percent in April.

Baoshan Iron and Steel, China's largest steelmaker, said Thursday that recent cuts in tax rebates on steel product exports would cost it almost 1 billion yuan (HK$7.8 billion) this year.

"Without considering other factors, the tax rebate adjustment will lead to a loss of nearly 1 billion yuan on the company's income in 2007," said Chen Ying, Baosteel's board secretary.

Baosteel has said that it sold 10 to 15 percent of its steel products to overseas markets. It exported 2.98 million tonnes of steel products, or 14 percent of its total sales, last year.

Baosteel, which vies with Nippon Steel and POSCO to supply China's steel market - the world's biggest - forecast that net profit would rise at least 50 percent for the first half of this year, after earnings rose more than 150 percent in the first quarter.

"The company will face more pressure in second-quarter operation costs after the increase in term-contract iron ore prices and the cut in tax rebates on steel product exports," Chen said. A 9.5 percent price rise for iron ore from miners in Australia and Brazil took effect in April, but analysts estimated it will add less than 100 yuan per tonne to the firm's production costs.
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Baosteel also said it planned to purchase a steel pipe plant from its parent, Baosteel Group, to boost its share of China's steel pipe market, which has grown rapidly in recent years in line with the booming automobile and oil drilling industries. The company plans to pay 362 million yuan for the plant, which has annual capacity of 100,000 tonnes of hot-rolled steel pipes and 85,000 tonnes of cold- rolled/cold-drawn steel pipes. The plant, which mainly produces high- precision steel pipe, earned more than 40 million yuan in net profit last year.