November 21, 2008

Baosteel lifts Q3 prices in secret

According to well inform source, Baosteel has already revised steel prices for Q3, fixing on the new prices in secret with its strategic customers and the direct users respectively rather than unveiling to the public.

It is reported that Baosteel will keep the price of steel used in quake relief unchanged. Baosteel's sales center confirmed the price correction with China Securities Journal, but didn't disclose the range of price change.

Mr Zhou Tao Guojin Securities analyst predicted that Baosteel's price hike at some 15% based on usual pricing strategy, while Mr Hu Hao with Zhong Yuan Securities said, as he learned the major steels will gain some CNY 300 per tonne to CNY 600 per tonne.

Mr Hu with Zhong Yuan Securities said following four aspects can explain Baosteel's price lift.

1. The supply or demand correlation holds sound and Baosteel's advantage in producing high value added product helps pass on the additional cost
2. Away from increasing cost of past years, coke price again gained 35% while this year's ore price talk between Baosteel and Australian suppliers may turn out a higher hike percentage
3. The recent steel market is upward and the other mills are striving to raise EXW prices
4. The international steelmakers lifted Q3 prices before Baosteel's move.

Mr Zhou Tao said Baosteel's hike is able to cover the additional cost. But Mr Hu Hao didn't think this hike serves a full reflection of the market supply and demand, and believed there is still upward room for the Q4. Baosteel's products are CNY 100 per tonne cheaper than WISCO and register USD 200 per tonne gap with the overseas prices.