It is reported that Baosteel was expected to release its latest prices for the third quarter on May 20th 2008 yet it failed to announce the prices until yesterday. Insiders told China Business News that the steelmaker had held a price conference last Wednesday but when it will publicize the price policy is still up in the air.

Analysts agree current market operation should be to blame for the delay.

As per report high steel prices have brought great cost pressure on downstream buyers and some even could not endure it. On the other hand on May 19th to 21st 2008 is National Mourning Day for earthquake in Sichuan Province and it is not proper to announce new price during that period.

Mr Fu Zhongzhe general manager of Baosteel Company Limited said earlier that steel price would undulate on a high track in the third quarter on account of high costs and robust demand. China's top steelmaker raised prices by 8% and 20% respectively in the first two quarters.

Mr Wang Jianhua deputy director of Mysteel Research Institute believes several factors will influence Baosteel's price settlement.

1. First price gap with its international competitors is widening. Global giants have frequently lifted steel prices, mostly by over 10%, leading to wider price gap with Baosteel. The Chinese steelmaker now eyes great space for price hikes.

2. Second its price gap with domestic companions is narrowing. Anshan Steel and Wuhan Steel have raised price in recent years and the profitability is climbing. Baosteel has to increase prices to maintain its profitability further to remain the leader in domestic steel industry.

3. Third, prices for raw materials might go up further in the coming quarter and will bring strong upward momentum for steel prices.

4. Fourth, supply might be tight amid bloomy home demand. Reconstructions after the earthquake indicate a swelling demand.

5. Steel price will influence Producer Price Index which will push up Consumer Price Index. As a state owned enterprise, Baosteel has to take macro-economy situation into consideration.

Mr Wang suggests that Baosteel can change its pricing mechanism and adjust prices for two or three times for the third quarter. In this case the steelmaker can announce smaller price increments and weaken the impact to the market.

(Sourced from MySteel.net)