Baosteel may cut prices

Baoshan Iron and Steel Co. Ltd. (Baosteel), China’s largest steel maker, will cut steel prices for the first quarter of 2006 in an effort to compete with domestic rivals. Baosteel is rumoured to be considering dropping its steel price by $50 to $80 per tonne on average for the first quarter of 2006.

Even though Baosteel’s steel product prices are higher than the Chinese market by about $100 per tonne on average, Baosteel is unlikely to cut the price difference all at once. The company?s management together with government officials would decide the price according to how much pressure they wanted to put on Chinese competitors.

Taiwan’s China Steel is likely slash its steel prices if Baosteel does. South Korean Pohang Iron and Steel Co. (POSCO) is reportedly lowering shipbuilding plate prices for the first quarter of 2006, which would impact China Steel. Baosteel lowered fourth quarter per-tonne sales prices for almost all of its major products by as much as $144 in August, which shocked the market. China Steel lowered its prices two days later.

The Chinese steel industry is seeing more mergers and acquisitions in addition to more foreign investment and technology as part of the new steel industry policy, which has put pressure on Baosteel. Baosteel has turned its sales focus back to the Chinese domestic market due to the increasing competition, the source said.

In addition, Baosteel said it is facing strong challenges from Wuhan Iron and Steel Corp.’s automotive plates and silicon sheets, and from cold-rolled plates and galvanizing plates produced by the joint venture between German ThyssenKrupp and Anshan Iron and Steel Co. (Angang).

China is expected to produce 340 million tonnes of crude steel in 2005 and most likely will break 400 million tonnes next year.