Baosteel lifts industry hopes with new round of price increases

PUBLISHED : Tuesday, 20 January, 2009, 12:00am
UPDATED : Tuesday, 20 January, 2009, 12:00am

Baoshan Iron & Steel, the mainland's top steelmaker, yesterday raised prices of its major products for March delivery by up to 8.72 per cent from rates for next month's deliveries, its second consecutive increase.

Market watchers said the increase marked the start of a sustainable rebound in the mainland steel market, although there was no strong evidence demand had fully recovered.

The Shanghai steelmaker raised prices of hot-rolled coil by 300 yuan (HK$340.50) per tonne, up 8.72 per cent to 3,742 yuan, and lifted prices of cold-rolled products by the same amount or 7.64 per cent to 4,226 yuan a tonne, all excluding a 17 per cent value-added tax, sources said.

Prices of zinc-galvanised sheets and colour-coated sheets were both raised by 350 yuan a tonne, but prices of thick steel plates were reduced by 300 yuan a tonne because of weak demand from shipbuilders.

A Baosteel official confirmed the firm had sent out its product prices for March delivery to its customers and had made some price adjustments. He declined to give details.

Helen Lau, a steel industry analyst at Daiwa Institute of Research, said the price rise reflected a return of market confidence in steel demand and prices, as Baosteel's March prices surpassed spot market prices.

Hot-rolled coil was now selling at about 4,000 yuan a tonne including VAT while Baosteel's March price was about 4,378 yuan a tonne including VAT, having rebounded 500 yuan or about 15.4 per cent from its low in December, Ms Lau said.

'This means that Baosteel expects steel prices in the next two to three months will be higher than market prices in January,' she said.

She added that other large steel mills were also expected to increase their prices.

Prices set by Baosteel, announced each month well ahead of its rivals, are considered a barometer of market trend.

Last month, Baosteel raised its product prices for February delivery by 6 to 8 per cent, its first increase in five months amid the supply glut.

Ms Lau said the new increase was moderate and indicated that the mainland steel market had shown signs of a slight recovery.

But she said there was no strong evidence that market demand had fully recovered.

Macquarie Securities yesterday said recent steel price rallies in all regions were likely to be short-lived as demand prospects for this year remained bleak, especially in the all-important vehicle and construction sectors.

Macquarie forecast in a report that global steel demand this year would decline 7.5 per cent year on year, although it expected steel demand on the mainland would still grow 2.4 per cent.

Meanwhile, Fitch Ratings yesterday affirmed Baosteel's long-term foreign currency issuer rating at BBB-plus and its short-term rating at F2 with a stable outlook.