Beijing : Baoshan Iron and Steel Company led a decline among Chinese steelmakers after Shenyin and Wanguo Securities Company downgraded the industry.
The downgrade was based on the prospect of narrowing profit margins and difficult iron ore negotiations.
Baoshan Steel, the listed unit of China's second-biggest steelmaker, dropped one per cent to 6.07 yuan at the close in Shanghai while Hebei Iron and Steel Company, the listed unit of the biggest steelmaker, fell 1.2 per cent to 4.02 yuan in Shenzhen.
The benchmark Shanghai Composite Index retreated 0.4 per cent.
China's steelmaking industry was lowered to "neutral" from "overweight" by Shenyin and Wanguo Securities analyst Zhao Xiange.
Major steelmakers would have "slim" profit margins in the third quarter and the outlook for iron ore negotiations wasn't optimistic, Zhao said in a report yesterday.
Baoshan Steel on June 4 said it cut prices for the first time in eight months.
Tokyo Steel Manufacturing Company, Japan's largest electric-furnace mill, lowered prices by as much as 12 per cent for July contracts, the first reduction in six months, the company said on June 14.
The Chinese government has raised banks' reserve requirement three times this year to slow down investment.
It has also raised mortgage rates and down payments for purchases of multiple homes to rein in housing prices.
"There's little possibility that the government will greatly relax macro and property policies so the constraint on steel prices hasn't been removed," Zhao said in the report.
Chinese steelmakers are resisting efforts by Vale SA, Rio Tinto Group and BHP Billiton to raise contract prices, the China Iron and Steel Association said.
