China’s top three steelmakers -- Baosteel, Wuhan Steel (Wisco) and Angang Steel -- have unveiled their first quarter results that were distinguished from each other even though they have been experiencing the similar stress of higher iron ore costs. Ansteel’s Q1 net profit was down 93.82 percent from a year earlier to 71 million yuan. By contrast, Wisco had a net profit of 610 million yuan, an increase of 111 percent. Baosteel’s income was projected to decline by approximately 10 percent.

This striking difference is believed to have much to do with the way they bought iron ore, aside from their different product mix. Both Wisco and Baosteel are dependent mainly on overseas raw materials based on the quarterly pricing system that is a reflection of the market during the previous three months. As the iron ore prices in the fourth quarter of 2010 began to falter, the two companies were buying iron ore at a relatively low price in the first three months of this year, particularly for Wuhan Steel which also reached deals on a monthly or spot basis.

By contrast, Angang Steel had to turn to its parent Ansteel Group for almost half of the necessary raw materials. The agreement between the two groups was based on a half-year term, which meant the subsidiary’s purchase costs of iron ore was calculated using a criterion during the latter half of last year when the worldwide iron ore prices were at a high level.