July 11, Shares in Angang Steel Co. Ltd. (0347.HK), a subsidiary of China's third largest steelmaker, fell sharply on Monday after the firm forecast a more than 90% earnings drop in first-half on high raw material costs and slumping steel prices.

Angang said in a filing to the Hong Kong stock exchange on late Friday its unaudited net profit for the first six months was seen falling to about RMB 220 million, down 92% from a year earlier.

The steep drop in profit was "mainly because of the rampant growth in the prices of raw materials and fuels which substantially exceeded the increase in the price of steel products of the company,” it said.

Earnings per share are expected to fall to RMB 0.03 for the six months from RMB 0.38 per share in the same period last year.

Its shares dropped 6.8% to close at HK$8.25, while the market's benchmark Hang Seng Index was down 1.67%.

Its rival Maanshan Iron & steel Co. Ltd. (0323.HK) lost 5.14% and Chongqing Iron & Steel Co. Ltd. (1053.HK) eased 1.64% in Hong Kong.

Chinese steel makers are being hit by sharp profit declines due to severe overcapacity; Chinese steel producers are still unable fully to pass through rising input costs, Goldman Sachs said in a research note on Monday.

Credit Suisse has forecast Angang's 2011 net profit to slide 71.6% to RMB 583 million, reflecting stagnant demand and poor pricing power, according to a Monday report by EJ Insight.