September 08, 2008

Baosteel likely Q3 price hike heating up Chinese market

Baosteel is slated to unveil Q3 delivery price next week and the market is heating up.

The price adjustment would come against the backdrop of escalating raw materials prices, price lift by global leading steelmakers and thriving market climate both at home and abroad. Baosteel would take into account of a couple of factors before releasing the delivery price, such as cost, profit, demand, market climate and macro economy etc.

Market analysts estimate that 65% benchmark ore hike would result in cost rise of some CNY 550 per tonne for Baosteel, quite trivial compared with its accumulative price hike of CNY 1000 to CNY 1400 per tonne in the first two quarters. However, other steelmaking ingredients like coking coal and coke have also witnessed ballooning price. In this case, the most effective solution for protecting profit margin is to lift up the EXW price.

Meanwhile, steel consuming sectors such as infrastructure, real estate, machinery, automobile and home appliances all have posted healthy growth, placing a solid floor under steel demand outlook.

On the export front, rising international prices are set to steam ahead in the months ahead, although some worry that summer holiday might dampen steel demand in European markets.
(Sourced from MySteel.net)