Steelmakers pin hopes on rise in product prices
Shares in mainland steelmakers surged yesterday amid industry optimism about the coming months, with mills expecting a recovery that began in the second quarter would continue.
Shanghai-listed Baoshan Iron & Steel (Baosteel), the country's biggest steelmaker, jumped 8.36 per cent to 7.91 yuan (HK$8.97), the most since February 16.
Maanshan Iron & Steel surged the 10 per cent daily to 5.58 yuan, while Wuhan Iron & Steel rose 8.05 per cent to 8.59 yuan, outperforming the Shanghai Composite Index's 1.18 per cent gain.
Maanshan Steel's Hong Kong-listed shares also rose, closing 5.46 per cent up at HK$5.22 compared with the 1.23 per cent fall of the Hang Seng Index.
A poll by Steel Business Briefing shows 57 per cent of 30 mainland mills, including 18 of the top 20, expect steel prices to rise this quarter despite its being a usually low season.
Mainland steel prices have rallied since mid-April and output has hit a high, supported by price increases at mills and traders' optimism.
The benchmark price of hot-rolled coil has risen about 7 per cent in the past month. The country's steel output hit a record 1.52 million tonnes per day between June 11 and June 20, equivalent to more than 10 per cent of last year's output based on the annualised production rate.
'We are beginning to see some trends of seasonality in some of the construction steels, but on the whole, the pricing dynamics remain robust near term,' Citigroup said in a report.
Baosteel, which has raised the prices of its key products for July delivery 10 to 16 per cent, is expected to announce a 5 per cent price rise for August delivery later this week.
The mainland's 72 biggest and medium-sized steel mills reported profit of 1.04 billion yuan in May.
The percentage of steel mills in a survey that believe prices will rise this quarter: 57%