As a majority of steel makers suffer from decline in gross profit margin, market capitalization and investment income in the first half, analysts are worried about the investment prospect of the steel sector.

    According to statistics from Wind Info, a consultancy firm, China's 31 steel companies listed on the Shanghai and Shenzhen bourses posted 38.8 billion yuan of net profit in the first half of this year, up 26 percent year on year.

    Their total operating revenue amounted to 607.497 billion yuan, up37.6 percent, higher than the growth rate of their net profit.

    However, about 80 percent or 24 companies saw gross profit margin sliding, indicating weakening profitability of the steel sector upon high cost.

    Included are large companies like Baosteel (600019.SH), WISCO (600005.SH), and Ansteel (000898.SZ).

    Although rising steel prices during the first half brought some benefits to steel makers, soaring iron ore prices have eaten their profits.

    Meanwhile, steel sector felt pains from violent fluctuations on the stock market.

    As of August 31, 2008, the last day for listed company to release interim results, the market capitalization of 31 listed steel companies totaled 520.71 billion yuan, down 60 percent from 1304.58 billion yuan in the same period last year, according to Wind Info.

    The net investment income totaled 896 million yuan, down 24.5 percent from 1.187 billion yuan.

    The average PE ratio of steel companies was less than 10 times,and the PE ratios of the aforesaid three major companies were all below six times.

    On August 1, the PB ratio of Hansteel (600001.SH) fell below 1,followed shortly by another three steel companies. PB ratios of seven companies lingered from 1 to 1.2.

    As it is uncertain whether the steel price will pick up, steel producers have begun to cut output, adding concerns about the annual profit of the steel sector in the rest of 2008.