STEEL.

Steel production continued to rise yoy in 1H07, rising23.93% to 270m tonnes.
Trade surplus widened. In 1H07, steel import dropped 7.62% while export
rocketed to 34m tonnes, up 97.7% yoy. Better net profit for whole sector yoy.
Due to firmer steel prices, sales increased 34.68% yoy and net profit
rose 108% yoy to Rmb80b in 1H07 for the whole sector. Most steel makers
posted 50%+ yoy net profit growth on their 1H07 results. .
Outlook. We see steel prices stablising for the rest of 2007 (Bao Steel cut 4Q07
steel prices by 5-8%) as capacity is curbed while export sales remain strong.
However, the slowing domestic demand, trade dispute and higher raw material
prices are risks faced by the sector.