Baoshan Iron and Steel Co has cut prices of major products for May delivery by up to 7 percent from April levels, its second consecutive monthly price reduction, as China's top mill narrows a price gap with domestic rivals.

Prices for hot-rolled steel products dropped 250 yuan (US$36.60), or 7.1 percent, to 3,292 yuan while prices for cold-rolled steel products fell 200 yuan, or 5 percent, to 3,826 yuan, according to several industry Websites.

Analysts said they were not surprised at the price trim because other mills have also cut prices earlier and Baosteel's prices are still at a premium of 300 yuan to 500 yuan a ton to spot market prices even after the cuts.

"It won't make much sense if you still consider Baosteel as a benchmark of domestic steel prices," said Mysteel analyst Xu Xiangchun. "Its pricing lagged the market so it cannot guide the market very much."

Shanghai-based Baosteel's seasonally adjusted prices had been viewed as a domestic benchmark for years. The company shifted to monthly pricing in the third quarter last year amid volatile market conditions and has delayed pricing announcements in recent months.

The domestic benchmark steel prices have fallen 17 percent since the end of January as mills increased output, betting demand would pick up after the Spring Festival holiday. But the market didn't and inventories increased, forcing Baosteel to cut prices again for April, after increasing them for February and March.

Baosteel, which lost 6 billion yuan in the fourth quarter, has said it could return to the black in the current quarter but steel prices would remain low in coming months.

(Shanghai Daily April 2, 2009)