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Split Price from Baosteel, Anshan I/S and WISCO Reflects Divided Opinions on Market Outlook
Mar 21,2013 11:56CST
smm insight
Source:SMM
Steelease believes that the split price from the three major producers reflects divided opinions towards market outlook.

SHANGHAI, Mar. 21 (SMM) -- China’s three major steel producers, Baosteel, Anshan I/S and WISCO, released ex-works steel prices for April. Baosteel hiked hot-rolled steel by RMB 150/mt, Anshan I/S cut hot-rolled steel prices by RM 300/mt, and WISCO kept prices for hot-rolled steel flat from a month ago. Previously, the three major steel producers kept the same pace for price adjustment, but they were quite divided this time, and Steelease believes that the major reasons are as follows.

First, the positive domestic and export orders at Baosteel boosted confidence, which made Baosteel to hike ex-works steel prices. Orders at Anshan I/S, however, did not improve much. According to Steelease, the downward adjustment of its holt-rolled steel and cold-rolled steel were attributed to poor orders and sluggish demand.

Second, Baosteel directly sells most of its products to downstream producers. The stable sales channel made it less affected by price fluctuation. For example, Baosteel directly cooperates with auto manufactures by providing them with auto steel plate. During recent months, the higher-than-expected sales of auto greatly fueled expectation over consumption of auto steel plate and boosted steel price from Baosteel. However, Anshan I/S steel largely sells products through agents. Currently, the procurement prices at agents have already higher than spot prices. Coupled with pressure form Hangzhou distributors’ boycott over Shagang Group, Anshan I/S cut ex-works prices for its steel products. 

Third, production cost at Baosteel is relatively higher as the company largely consumes imported iron ore. However, Anshan I/S has lower production cost as it largely use self-produced iron ore, which leaves room for Anshan I/S to cut prices.

Fourth, market opinions over price outlook are severely divided recently, which resulted in mixed steel price in market.

Steelease believes that the split price from the three major producers reflects divided opinions towards market outlook. Steelease expects that possibility for iron ore prices to fall further is small, and demand from downstream producers is improving. Although previous high output and inventories curb upward momentum of steel prices in the short term, possibility for steel prices to lurch higher is high in the medium-term.

 

Baosteel ex-works price
China steel price

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