China’s Baosteel sets higher October prices

September 12, 2013

China’s Baoshan Iron & Steel said it will keep list prices of its hot-rolled coil products unchanged but will scrap a discount offered on them and also raise prices for some other products for October bookings. The latest pricing moves by China’s biggest listed steelmaker by market value, watched closely by traders and analysts for clues on market trends, indicate its positive demand outlook.

Baosteel said after markets closed on Wednesday it is scrapping a discount of 100 yuan ($16.34) a tonne for hot-rolled coil orders that it previously provided to dealers. Offering discounts on list prices is a common practice among Chinese mills. Baosteel did not specify how long it had been offering the discount.

The company is also raising prices of cold-rolled coils, mainly used for making cars and appliances, by 100 yuan a tonne, it said in a statement posted on its web site ( Baosteel had raised hot-rolled coil and cold-rolled coil prices for September bookings. Steel demand in China, the world’s biggest consumer of the alloy, has unexpectedly picked up ahead of traditionally strong consumption season in September and October, prompting mills to lift run rates in August. “The increase is modest, but sends a positive signal that the company expected demand to remain healthy in the near future,” Cheng Xubao, an analyst with industry consultancy in Beijing, said of Baosteel’s pricing moves. A stabilising economy and Beijing’s targeted measures to step up investment in railways and construction are expected to sustain steel demand.

Not all mills are convinced about a broad rise in steel demand, though. Jiangsu Shagang, China’s largest privately owned steelmaker, will cut prices of rebar and wire rod for construction use by 30 yuan for mid-September bookings, traders said, underscoring its concerns on subdued demand in coming weeks. And surging raw material costs have squeezed mills’ margins, forcing some to curb output this month. Iron ore prices jumped 6 percent in August, compared with a 3.1 percent gain in steel prices. Shares of Baosteel, which has a market value of around $12.5 billion, shed 1.3 percent on Wednesday. The broad Chinese stock market rose 0.2 percent.Courtesy Reuters

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