Baoshan Iron & Steel Co, the listed unit of China's largest steel group, yesterday said it would cut most of its product prices by 200 yuan to 300 yuan (US$29.20-US$43.90) a ton for the fourth quarter to move closer to market prices that had been reduced by weaker demand.

The mill decided to lower prices for its cold-rolled steel products by 300 yuan a ton, or nearly 5 percent, and galvanized sheets by 200 yuan in its first cut this year, traders said yesterday. Analysts said the move followed cuts made by rivals after prices for iron ore, coking coal and energy fell over the past month which eased production costs.

Baosteel prices typically represent premiums over market prices.

China Iron and Steel Association's domestic steel price composite index stood at 160.99 at July-end, 0.48 points lower than June-end, the first retreat this year.

Baosteel's price cut also provides evidence of China's weakening demand for industries such as automobile and home appliances amid concern of an economic slowdown.

"We do see some demand weakness in some downstream sectors,'' said Yang Baofeng of Orient Securities said. ''While Baosteel sells a big part of its products directly to users, skipping traders, the mill should be able to well hold its premium."

Cold-rolled and galvanized steel products are mainly used by auto makers and appliance manufacturers.

Baosteel will keep hot-rolled product prices unchanged while raising the prices for plates used by ship builders.

Baosteel has not made fourth-quarter prices public. The mill has previously announced prices seasonally.

It also didn't publish third-quarter prices amid speculation any hike announcement would raise criticisms after the May 12 Sichuan earthquake.

Baosteel fell 1.04 percent to 6.69 yuan yesterday in Shanghai trading following the announcement.

(Shanghai Daily August 26, 2008)