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September 24, 2009

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Oversupply leads to cut in prices for Hebei mill

HEBEI Iron & Steel Group, China's second-largest mill, has cut the price of its benchmark reinforcing steel bar by 10 percent as oversupply weighs on the market, industry consultancies reported yesterday.

The move comes after China's steel output surged to a record last month as mills ramped up production to cash in on high prices. The resulting glut has led to a drop of more than 20 percent in steel prices in the domestic market since early August.

Hebei Steel cut the price for its key rebar product, used by the construction industry, to 3,550 yuan (US$520) a ton from 3,950 yuan, according to consultancies Umetal and Mysteel. The mill couldn't be contacted for comment.

"Major mills have been forced to cut prices because of weak orders," said Umetal analyst Wang Xiaona. "Further downside is possible but should be limited."

China Galaxy Securities said in a report that oversupply will prevent a rebound in prices in the short term, though domestic and global economies are showing signs of recovery.

The Hebei mill also cut its hot-rolled coil prices by 10 percent to 3,650 yuan a ton and cold-rolled coil prices by 13 percent to 4,650 yuan a ton.

Hebei Steel's flagship listed arm, Tangshan Iron & Steel Co, lost 3.91 percent to 6.63 yuan in Shenzhen trading yesterday.

Meanwhile, China's securities regulator has approved a plan for the merger of Tangshan Iron and two other listed units of Hebei Steel, paving the way for a group listing, the listed companies said on Tuesday.

Under the restructuring, Tangshan Iron will acquire the assets of Handan Iron & Steel Co and Chengde Xinxin Vanadium & Titanium Co via a share swap.

Tangshan will then be renamed Hebei Iron & Steel Co, with Handan and Chengde being delisted.




 

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