Robust demand for metals and minerals has pushed up the first-quarter profits of China Minmetals Development Co Ltd (CMD), the nation's leading trader in the raw materials, by a soaring 350 per cent surge.

And analysts are optimistic that the firm can maintain this impressive performance in its full-year results, but cautious that this growth might slow down in the rest of the year.

The big jump consolidates the firm's lead in the competitive trade sector.

The company's revenue in the January to March quarter increased by 44.18 per cent to 11.98 billion yuan (US$1.45 billion) as its staple business - international and domestic trade - thrives.

CMD's profits stands at 295 billion yuan (US$35.67 million), a 72.65 per cent increase from the last quarter in 2003.

Trade expert Fan Ying says CMD's bullish activity comes as China's demand remains strong for raw materials such as iron, steel, iron ore and coking coal, products CMD either produces or trades in.

The company attributed its skyrocketing profits to steep price rises in iron ore and coking coal, which powered up the firm's trading businesses.

For example, the price of coking coal jumped from 300 yuan (US$36.3) per ton in early 2003 to the current 1,300 yuan (US$157.2).

"And the company will continue to make records as the demand in China continues to rise," Fan said.

The company predicted that its half-year net profit could grow by over 50 per cent compared to the same period in 2003.

The company's forays into the mining and manufacturing industries have also recently paid off, becoming another major profit engine for the trader, said Chen Zhun, an analyst at Eagle Securities.

But this exceptionally high growth will be hard to maintain due to the large base and a possible slowdown in raw material demand in the latter half of the year, analysts warn.

"The central government's tight control on bank loans and brakes on overheating investment have been effective," said Jiang Nan, a steel analyst at CITIC Securities, adding that "steel prices have obviously dropped recently."

CMD is also aware of the uncertainty prevailing in the raw materials market.

"The business scale and profits are unlikely to increase at the same pace in the first quarter due to a combination of factors such as changes in market demand," the company said in its quarterly report.

"The growth rate in the second half of 2004 may slow down," it added.

Other trading giants also registered good performances in 2004, despite the continuous opening of the sector.

Sinochem International Co Ltd, Sinochem Group's listing arm in Shanghai, posted a net profit of 126.6 million yuan (US$15.31 million) in the first quarter, up 94 per cent year-on-year.

However, small and medium-sized trading firms are seeing decreases or slowdowns in revenues and profits.

Fan said this is a result of increasing competition due to the continuous opening of the sector.

"An increasing number of players have plugged into this lucrative market since the central government lowered the threshold beginning from 1999," she said.

"Although market scale is increasing, some trading firms can only find their business shares being taken over by newcomers."

Source: China Daily