Baosteel raises March prices

BEIJING, Feb. 13 -- Baosteel Iron and Steel Co raised March prices for major products by as much as 7.4 percent in response to higher demand and rising costs as well as to recoup some losses when it unexpectedly suspended price increases in February.

Hot-rolled coil for March delivery increased by 300 yuan (US$44) a ton, or 7.4 percent, from February, while prices for cold-rolled products also rose 300 yuan, or 5.4 percent, Baosteel announced Friday.

The increases are within analyst expectations, given the recent industry-wide margin squeeze caused by a fall in spot steel prices since early January and rising coke and spot iron ore prices, said Gao Hua Securities, Goldman Sachs' China partner.

Hu Yanping, steel analyst of research firm UC361.com, said demand from automotive and home appliance makers has been strong for Baosteel's cold-rolled products, thanks to government stimulus measures.

Baosteel had unexpectedly kept February prices unchanged for most products amid speculation the steel mill did that to strengthen China's position in annual negotiations over term iron ore prices with foreign miners. With the March increases, the company is moving to catch up with other major mills which had raised February prices as the market is more certain now that term ore prices will climb.

"Baosteel has to take into account cost issues as the company highly relies on imported ore," Hu said.

On behalf of Chinese steel makers, Baosteel's state parent is negotiating annual term ore prices with Anglo-Australian miners Rio Tinto and BHP Billiton as well as Brazil's Vale.

China's five largest mills have proposed to one of the top three ore suppliers that they pay a provisional 40 percent more for contract ore, according to a Platts newsletter. A hefty 40 percent jump would see Australian ore prices return to close to the pre-financial crisis record in 2008. Baosteel declined comment.

Customs data showed this week that China's iron ore imports fell 25 percent to 46.6 million tons in January from December's near-record high of 62.1 million tons.