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Baosteel plans to lower most prices in Oct

By Wang Ying (China Daily)
Updated: 2008-08-27 10:48

Baoshan Iron & Steel (Baosteel), the country's largest listed steel mill, announced it is to lower most of its steel products prices in October after it raised prices in three consecutive quarters this year.

This may be the result of weakened downstream demand and a new round of economic adjustment, analysts said.

Baosteel announced on Monday that it will slash the price of its cold-rolled steel products by 300 yuan ($43.78) per ton from the fourth quarter. The price-cut list also includes galvanized sheet products, which will go down 100 yuan per ton, hot-rolled pickled steel products, which will drop 300 yuan per ton, and galvanized fingerprint resistant sheet, which will dip 400 yuan per ton.

However, the prices of hot-rolled plate and silicon steel will stay unchanged. Products such as shipbuilding plate will be raised by 300 yuan per ton.

In a statement explaining the price adjustment, Baosteel said the new prices were the futures price for the fourth quarter. Experts believe the explanation will give Baosteel a "broader leeway" to further correct its product prices.

An analyst from Haitong Securities told China Daily that the price change is lower than the market expectation, and that he didn't think it will generate a further impact on the steel product market. Because of its high quality, Baosteel's products are generally priced above the market quotation.

Over the past two months, steel products witnessed a 10 to 12 percent price drop in the domestic market. "By correcting its product prices, Baosteel is setting its price on a more market-orientated basis," Yang Baofeng, analyst from Dongfang Securities, said.

Another reason behind the price revision is the sales slump in the global steel market during the third quarter of this year, which adds to market uncertainty. "All the downstream industries, such as automotives, construction materials and home appliances are having an oversupply problem, which as a result will erode their demand for steel products," the analyst from Haitong Securities said.

"The last but not the least reason is the tax," he said. "Inside information has it that the central government will soon stop its policy of export tax refund. Once it becomes effective, domestic steelmakers will be reluctant to export their steel products. Therefore, a growing stockpile of steel products will be found in China, which will lead to a further price cut."