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UPDATE 2-China's Baosteel Shows Caution, Keeps Sept Prices Stable
Aug 17, 2010 10:11CST

SHANGHAI, Aug. 17 -- China's Baoshan Iron & Steel (600019.SS: Quote) will keep September steel prices stable from August, signalling a cautious outlook on demand and price gains made since July.

Hot-rolled coil will stay at 3,842 yuan ($565.6) per tonne, while that for cold-rolled coil will remain at 5,226 yuan per tonne. the same as in August, the company said on Monday in a statement on its pricing website (www.bsteel.com.cn).

Monthly price levels by Baosteel, China's second largest steel producer, are regarded as an industry benchmark and are often followed by other steel mills, including Wuhan Iron & Steel Group and Anshan Iron & Steel Group.

Hebei Iron & Steel Group, the country's biggest steel maker, had already announced a price increase of up to 300 yuan per tonne for its major products effective from Aug 11, raising expectations that other major steel mills would follow soon.

But analysts said rebar price gains on China's domestic market to 3,940-3,960 yuan per tonne last Thursday from a low of 3,600 yuan per tonne in mid-July were driven by traders, rather than end-user demand, forcing Baosteel to remain cautious.

"I would rather consider this recent wave of price rises as a result of speculation among market traders, and we can see that Baosteel has still remained quite cautious by not raising prices by a large margin," said Du Hui, a steel analyst with Qilu Securities.


Baosteel also said it would also maintain hot-dipped galvanized coil prices at the same level as last month, but would raise electrical steel prices by 500-800 yuan per tonne.

Traders predicted Baosteel might increase prices indirectly by removing discounts of roughly 300 yuan per tonne to certain customers -- though it did not mention the issue in its announcement.

Jiang Zhiwei, an analyst with BOC International Futures, said Baosteel was likely to remain cautious, knowing that a hasty move might jeopardize a fragile recovery in the sector.

"The company's announcement is within expectations, and it is good enough for the company not to raise basic prices this time around, when the domestic market is on the rise," he said. ($1=6.793 Yuan)



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