China's Baoshan Iron and Steel Co. has cut prices for December by as much as 20 percent in a bid to lift domestic demand amid a slowing economy.

The company lowered prices for cold-rolled steel by 900 yuan (US$132) a ton and for hot-rolled steel by up to 1,000 yuan a ton, said Mysteel Research Institute. Its price of cold-rolled steel for November is 5,396 yuan a ton, and for hot-rolled steel 4,942 yuan a ton, sources said.

As the listed arm of China's largest steel mill, Baoshan cut output in September and reduced prices for October to stimulate domestic demand.

"Steel prices slumped sharply after the National Day holiday by an average of 15 percent," said Luo Wei, an analyst at China International Capital Co..

"Although Baoshan cut its sales prices for November, there is still a premium between the sales price and market price. The latest reduction for December can make the price difference more reasonable."

Luo predicted a dismal fourth-quarter profit for Baoshan and that steel prices for next year will tumble 17 percent on average due to the weak demand.

Other Chinese steel mills, such as Angang Steel Co., also face a profit squeeze as new plants open, raw material costs jump and demand slows.

Domestic steel prices have soared 23 percent this year to a record in early June as mills raised prices to counter higher raw material and energy costs, tapping the robust demand.

But they have started to fall sharply since the last quarter with prices more than 30 percent lower than the June peak.

Four mills, which account for 16 percent of China's steel output, have agreed to cut it by 20 percent from this month.

(Shanghai Daily October 22, 2008)