BAOSHAN Iron and Steel Co yesterday reported a worse-than-expected 37 percent drop in first-half net earnings on slowing demand and rising costs, and predicted a gloomy outlook for the second half of this year.

China's largest listed steel maker earned 5.08 billion yuan (US$796 million) in the first six months, compared with 8.05 billion yuan in the same period a year earlier. That missed the 6.06 billion yuan average estimates of five analysts polled by Bloomberg News. Revenue rose 13 percent year on year to 111.1 billion yuan in the first half.

Major Chinese steel companies have seen profit margins average 3.14 percent in the first half, compared with 3.54 percent a year earlier, according to the China Iron and Steel Association, citing competition and higher costs of raw materials such as iron ore and coking coal.

Other Chinese steel companies have earlier reported a plunge in interim results, with Angang Steel Co's first-half profit slumping 91 percent.

Shanghai-based Baosteel forecast outlook for the second half of the year as dull and said domestic steel mills could still face a big pressure on profit margins.