By Liang Fei

Domestic steel companies are still facing a gloomy fourth quarter despite signs of improvement in the economy, experts said Tuesday, after major steel producers reported disappointing third-quarter results.

Shanghai-based Baoshan Iron & Steel Co (Baosteel), China's largest steel maker by market capitalization, reported a 4.88 percent year-on-year drop in net profit to 1.18 billion yuan ($189 million) in the third quarter, Baosteel said in a filing to the Shanghai Stock Exchange Tuesday.

Other steel mills have been hit harder amid severe overcapacity and sluggish demand in the sector. Liaoning-based Angang Steel Co saw its losses reach 3.17 billion yuan in the July-September period, ranking first among loss-making companies that are listed in the mainland.

Anhui-based Maanshan Iron and Steel Co and Hunan-based Valin Steel also incurred losses of over 2.5 billion yuan in the third quarter respectively.

"Though steel prices have seen a moderate rebound since September, steel production and iron ore prices have also risen," Qu Xiuli, deputy secretary-general at the China Iron and Steel Association (CISA), told the Global Times Tuesday.

Data from Beijing Lange Steel Information Research Center shows that domestic steel prices have seen an increase of around 350 yuan per ton since September, boosted by a series of favorable developments, including the 1 trillion yuan worth of infrastructure projects announced by the National Development and Reform Commission last month.

"Steel companies may see narrowed losses in the fourth quarter, but they still face tough times ahead given uncertainties in iron ore prices and overcapacity in the sector," Wang Guoqing, a senior analyst for Beijing Lange, told the Global Times Tuesday.

Qu from the CISA noted that a change in business strategy and an upgraded product portfolio will be needed for firms to survive the current predicament.

Baosteel announced Tuesday that it would sell its loss-making plant in Luojing, Shanghai to its parent company, Baosteel Group.

The Luojing plant boasts an advanced smelting technology called Corex, but experts noted that it is very costly to use the technology.

Shanghai Securities News reported Tuesday that Baosteel may transfer part of its production lines and technology at the Luojing plant to its new steel project in Zhanjiang in South China's Guangdong Province.

Wang noted that it is a trend for steel companies to move their production out of urbanized areas such as Shanghai,  and she also said that the Zhanjiang project would be a major focus of Baosteel's future business.

Baosteel will also increase its investment in Zhanjiang. The company will buy a 71.8 percent stake in Zhanjiang Steel from the State-owned Assets Supervision and Administration Commission of Guangzhou Municipal Government, Baosteel said in a separate filing to the Shanghai Stock Exchange Tuesday.