Angang Steel Co, China's second-biggest steel maker, said raw-material costs may rise faster than steel prices in the second half, squeezing its profit margins.

The average selling price for its products in the third quarter will be between 5,800 yuan and 5,900 yuan a ton, board secretary Fu Jihui said yesterday in Hong Kong. That's as much as 5.4 percent higher than in June, and lower than the 6,116 yuan forecast by Credit Suisse Group.

Chinese steel makers need to keep raising steel prices as the costs of iron ore, coking coal and energy had jumped to records. Steel prices in China are heading for a fourth straight week of decline on concerns China's capacity growth may outpace demand, said Beijing Antaike Information Co.

Profit "margins may be under pressure," Fu said at a press conference, without giving details.

Angang fell 3 percent to close at HK$10.30 (US$1.32) in Hong Kong trading. The stock has dropped 52 percent this year, compared with a 23-percent decline in the key Hang Seng Index.

The company this week reported a 25-percent gain in first-half profit to 5.99 billion yuan (US$873 million) after it raised prices to benefit from higher demand, according to Bloomberg News.

Contract iron ore prices gained as much as 97 percent this year, while coking coal prices have more than doubled for Chinese mills.

(Shanghai Daily August 14, 2008)