Chinese steelmakers raise output, prices

Some of China's leading steelmakers plan to raise prices of major products, while others say they will raise output amid confidence that demand is growing as shipbuilders in South Korea and Japan place orders for steel.

China's leading steel maker, Baosteel, is reported to have decided to raise prices of major products from February 2009, its first increase after cutting prices for major steel products four times since August due to declining demand.

Citing industry sources the official China Securities Journal said that Baosteel will increase its cold-rolled steel price by 300 yuan ($44) per tonne, and many other Chinese steelmakers like Angang Steel Co, Beijing Shougang Co and Shagang Group have raised their January prices for hot-rolled steel products.

The price of hot-rolled coils has surged by 20 per cent from a 33-month low in mid-November with prices rising to $515 a tonne last week in key Chinese markets.

The Journal said that January prices for low-carbon hot-rolled steel is increased by 350 yuan ($51.10) a tonne while its cold-rolled steel price was raised by 230 yuan a tonne.

It also reported that Baoshan Iron & Steel will increase its capacity for steel plates by 29 per cent this year to meet the extra demand from shipbuilders in South Korea and Japan with Baoshan doubling plate sales to Hyundai Heavy Industries to 200,000 tonnes next year.

According to analysts, South Korean shipyards are placing orders on Chinese steelmakers as steelmakers in Korea and Japan are not able to cope with the industry demand as South Korean shipyards has orders to build ships for the next four years.

Steel plates, which are used in  making hulls for ships has been Baoshan's most profitable product, and prices of it has almost doubled this year.

Chinese steelmakers, like others globally have been hit hard with a sharp decline in demand from the domestic automobile industry and construction slump, as in the month of November, steel production was 35.18 million tonne, a decline of 12.4 per cent and China's steel industry recorded a loss in October, the first time in six years.

Xu Xiangchun, a Beijing-based analyst with Mysteel Research, told the journal that, "The sudden reversal reflects that market confidence has steadily improved and panic selling has gradually disappeared."

Some analysts say that the increase in steel prices in China is due to cuts made in production by Chinese steelmakers over the past few months but the country has seen a demand for steel during the spring festival.

China's steel production in November was 35.18 million tonne, a decline of 12.4 per cent and the report however cautioned that the surge in steel prices in China was not a sign of recovery of the global steel industry, as global demand is still low key due to the economic slowdown and recession in some countries