Many small and medium-sized steel manufacturers have raised
their prices ahead of an expected price increase announcement by
Baosteel, the nation's largest steelmaker.
Jiangsu Shagang Group yesterday raised the factory price of
screw steel by 240 yuan per ton. Shandong Laigang Group raised the
price of several steel products by 100 yuan per ton, and Baotou
Steel announced it was raising hot-roll and cold-roll steel price
by 400 yuan per ton from March.
The price of cold-roll steel quoted by distributors jumped
sharply yesterday, ranging from 100 to 270 yuan per ton, according
to statistics from Mysteel.com, which tracks steel sales.
Analysts said steel manufactures reacted quickly to the
expectation of a larger price jump by two largest steelmakers,
Baosteel and Shougang Group, in the second quarter.
"Many distributors are hoarding steel products and waiting for
the price to rise," said Gao Bo, an analyst at Mysteel website. In
doing so, "they have created a temporary supply squeeze", he
said.
An industry insider said Baosteel's price adjustment has already
been settled in an internal meeting yesterday morning, and the new
price will fully cover the rising cost from the expected 65 percent
increase in iron ore price. But he declined to elaborate.
Analysts said the added cost from a 65 percent iron ore price
jump ranged from 783 yuan to 824 yuan, and that the added cost for
large steelmaker such as Baosteel is lower than that for other
small and medium-sized manufactures.
Zhou Tao, an analyst at Sinolink Securities Co Ltd, said
Baosteel can fully cover the rising raw material cost by raising
price by 400 yuan per ton, or 10 percent, in the second
quarter.
Baosteel has already raised steel price by around 10 percent in
the first quarter this year. The company's hot-rolled steel coil,
commonly considered a market benchmark, was priced at 4,042 yuan a
ton in the first quarter.
The 65 percent raw material price increase will add 500 to 550
yuan cost for Baosteel, and 600 to 650 yuan to Wuhan Steel, said
Zhou.
The expected 65 percent ore price rise will translate into a
rise of more than 20 percent in steel production costs, Zou Jian,
chairman of Metallurgical Mines Association of China, told
China Daily.
Rio Tinto group, the world's second largest iron ore producer,
has said it intends to hold out for a higher price than the 65
percent rise agreed between Vale of Brazil and Japanese and South
Korean steelmakers because it believes it deserves a premium on its
iron ore as its mines, which are in Australia, are closer to Asia
than Vale's.
Tony Loo, managing director of Rio Tinto China, earlier said the
ore supplier would seek a freight premium on the iron ore it ships
to Asian steelmakers.
(China Daily February 22, 2008)
