Tuesday, February 26, 2008

More steel price rises


AUSTRALIA'S biggest steel maker, BlueScope, yesterday warned that massive rises in iron and coking coal prices were set to stoke inflation, and flagged looming increases in prices of steel products.

Last week, the country's second-biggest steel maker, OneSteel, similarly warned of rising prices. OneSteel has raised its prices by about 10 per cent in recent months.

But with interest rate rises set to bite and with economic growth set to slow, there is debate over how long steel price increases in Australia will be able to stick.

"I suspect the steel industry may find it harder to pass on the higher prices than they currently feel it is," National Australia Bank chief economist Alan Oster said.

While BlueScope is set to benefit from soaring global steel prices over the next six months, chief executive Paul O'Malley said, in some segments, such as building, competition from alternatives such as roofing tiles would limit price increases and put a squeeze on margins.


Baosteel, China's largest iron and steel maker, has raised steel prices for the second quarter of 2008 after it agreed with Brazilian iron ore supplier Vale on a 65percent price hike this year.

    Prices of major cold- and hot-rolled products will increase by 800 yuan (111 U.S. dollars) per ton in the April-June period, compared with the January-March period, Tuesday's China Securities Journal quoted an announcement by Baosteel as saying.

    Ultra-low carbon steel and high carbon steel will see a price rise of 800 yuan a ton and the price of steel cable will climb 600 yuan.

    Considering that Baosteel has a heavier reliance on imported iron ore than other domestic competitors, a 65-percent iron ore price rise could translate into a cost mark-up of 258 yuan for Baosteel, as against 116 yuan for other domestic steel makers, according to Chemease, a business information provider on Chinese chemical commodity markets.

    A steel price hike by up to 800 yuan will not only offset its cost mark-up but also allow substantial room to make profit, said Chemease analysts.

    "The hefty price hike shows Baosteel's confidence in this year's steel market," said Du Hui, steel industry analyst with Chemease, who added that further price rises by the steel giant are "very likely" in the third and fourth quarters.

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