BEIJING (XFN-ASIA) - Shougang Group, parent of Beijing Shougang Co Ltd (SZA 000959), said its production costs in 2008 are expected to rise by 2.77 bln yuan due to higher iron ore prices, a senior company official said.
Wang Baomin, director of the group's planning and finance department, made the comment in an interview carried on the company's newspaper Shougang Daily.
About 50 pct of the group's iron ore is imported, and higher prices will exert huge pressure on normal production, he said.
Production costs for iron have risen to 3,600 yuan per ton at the end of June, with coal and coke prices also rising, Wang said.
"If we include the recent prices hikes in oil and electricity, production costs will increase further," he added.
Last week, Baosteel Group reached an agreement with Rio Tinto on an increase of up to 96.5 pct in iron ore contract prices for the year to March 2009.
China raised average electricity prices by 2.5 cents per kilowatt hour since July 1.
In 2007, Shougang Group booked sales of 109 bln yuan, up 31 pct year-on-year, with an operating profit of 4.36 bln yuan, up 60 pct year-on-year, according to its website.
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