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Baosteel raises prices on demand rally

BAOSHAN Iron and Steel Co has raised August prices for major products by up to 14 percent from July's level amid recovering demand from auto makers and the construction sector.

China's top listed steel maker increased prices for hot-rolled products by between 350 yuan (US$51.2) and 500 yuan a ton and raised cold-rolled steel coil prices by 500 yuan, following price increases for July, according to Umetal and other industry data providers yesterday.

The Shanghai-based company doesn't publicly announce price changes.

Major steel mills have been raising prices and output in recent months to take advantage of recovering demand, spurred by a government stimulus package. China's crude steel output rose to 45 million tons in June, Umetal said last week. That's 1.5 million tons a day, the highest daily output in 11 months.

Still, analysts said the Baosteel increases have exceeded market expectations as they outpaced market price gains.

"Traders and users may reduce orders as the prices are more than they can afford," Umetal analyst Hu Yanping said. "But we also understand Baosteel's price increase because the mill did see a good order book in recent months, especially from auto clients."

China's passenger-vehicle sales accelerated 48 percent in June, the biggest jump since February 2006. Baosteel occupies more than half of China's auto sheet market.

"Still, I think it's more about demand pick-up rather than cost issue," China Securities analyst Wang Zhe said of the Baosteel price adjustment.

The price hike also came at a time when China is asking for a deeper cut for term iron ore prices from global miners after Japanese mills accepted a 33 percent reduction. Some market participants say the Baosteel price change may indicate China is ready to accept the prices that the Japanese mills have signed for the steel making raw material.


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