Baosteel raises costs of key products

PUBLISHED : Thursday, 11 June, 2009, 12:00am
UPDATED : Thursday, 11 June, 2009, 12:00am

Baoshan Iron and Steel (Baosteel) has raised prices for its major products 10 to 16 per cent for July delivery, the first increases in four months, industry sources said, signalling the mainland's biggest steelmaker is optimistic about demand.

The move fuelled the rally in some Hong Kong-listed steelmakers yesterday, with Angang Steel jumping 8.23 per cent to HK$13.42 and Maanshan Iron and Steel leaping 11.07 per cent to HK$5.42.

Prices for hot-rolled steel products will rise 500 yuan (HK$567) per tonne or 16.2 per cent to 3,592 yuan, while prices for cold-rolled steel products will increase 400 yuan per tonne or 10.5 per cent to 4,226 yuan, according to figures from China Securities Research. Prices for galvanised steel sheet will increase 500 yuan a tonne or 13.4 per cent to 4,227 yuan.

All the prices exclude the 17 per cent value-added tax.

Baosteel's price increases, which follow similar moves by Angang Steel and Wuhan Iron and Steel, showed that the recent rebound of steel prices would persist into the third quarter, said Wang Zhe, an analyst at China Securities.

After the increases, Baosteel's product prices for July were 400 yuan to 500 yuan higher than current domestic spot steel prices but were about the same level as in March and April, he added.

Domestic steel prices rebounded in mid-April after a decline in February, as Beijing implemented a 4 trillion yuan (HK$4.54 trillion) economic stimulus package that spurred steel demand.

'July and August are always the high season. I think steel prices will remain stable,' Mr Wang said. However, he was sceptical whether the relatively high steel prices would be sustainable in the fourth quarter when the high season ended.

Earlier this week, investment bank Macquarie revised upwards its price forecast for hot-rolled steel 8-17 per cent despite overcapacity concerns. The latest forecast is US$490 a tonne this year, US$565 next year and US$590 in 2011, to reflect forecasts of higher mainland demand and higher raw materials prices.