BAOSHAN Iron and Steel Co said yesterday its profit in 2009 fell 10 percent from a year ago as it was squeezed by rising cost and sluggish demands.

It earned 5.82 billion yuan (US$855 million) in profit in 2009, down from 6.5 billion yuan a year earlier. Revenue tumbled 26 percent annually to 148.5 billion yuan last year, the mill said in a statement to Shanghai Stock Exchange.

"The company's weak performance was the result of declining steel exports and stagnant domestic sales while major ingredients in steel production such as coking, coal and iron ore started to pick up in the third quarter," Shanghai-based Baosteel said.

But analysts said Baosteel's performance was better than the industry average, with major domestic steel mills reporting a total profit of 55.4 billion yuan in 2009, down 31.4 percent from a year earlier.

"The company has benefited from a shift in the product mix," said Huang Jing, a Huatai Securities Co analyst. "Cold-rolled steel sheet, used in cars and consumer goods, became the largest income generator as the government's subsidies on home appliances and car purchases boosted sales."

Huang forecast the first quarter to see a quarter-on-quarter growth as demand for cold-rolled steel continued to rise under the government stimulus packages. But the second quarter is likely to be hit.

April 1 is usually the deadline in annual term ore talks. But China has not reached a deal with iron ore giants due to disputes on the annual iron ore price. Japan's Sumitomo Metal Industries Co has agreed to a 90 percent rise in ore prices demanded by Vale SA for the quarter which started yesterday.

"If Baosteel has to accept the same price increase, profitability will be further eroded," said Huang.