Baosteel boosts prices to pass on increased iron ore costs

Top producer cites cheap domestic steel as mills remain in deadlock with miners

Baoshan Iron and Steel (Baosteel) will raise its third-quarter key product prices by 6 per cent to 13 per cent to help offset the impact of a widely expected increase in iron ore prices.

China's largest steel producer said yesterday it had raised the average ex-factory price of hot-rolled products by 8.23 per cent to 3,942 yuan a tonne, cold-rolled products by 6.67 per cent to 4,796 yuan and hot-rolled electroplated products by 13.25 per cent to 5,127 yuan.

'The second-quarter prices of Baosteel's products are clearly lower than equal quality products in Europe and the United States,' the company said. 'Pushed by integration of the global steel market, the momentum is there for Chinese domestic market prices to go up.'

Citing consultancy CRU's figures, Baosteel said the second-quarter mainland average hot-rolled product price was 18.62 per cent lower than that in the US and 15.58 per cent less than that in Germany.

The announcement comes as mainland steel companies, led by Baosteel, are still locked in negotiations with Brazil's Companhia Vale do Rio Doce (CVRD) as well as Australia's BHP Billiton and Rio Tinto on contract prices for this financial year to March. The three mining giants control 80 per cent of the world's seaborne iron ore trade.