|August 15, 2011|
China steel mills raise Sept product prices as demand picks up
|* More steel mills follow Baosteel with similar price rises|
* Steel demand to stay firm on solid economy growth
* Steel inventories down 3.24 pct in July from June
* Iron ore price up 1.5 pct in July (Adds CISA monthly report)
By Ruby Lian and Jacqueline Wong
SHANGHAI, Aug 16 (Reuters) - More of China's leading steel mills have decided to raise prices of their main products for September bookings, aiming to catch up with rising spot market prices and in anticipation of stronger demand next month.
Two leading mills, Wuhan Iron & Steel Co Ltd and Beijing Shougang Co Ltd , will raise September prices for their main flat steel products in the wake of a similar move by Baoshan Iron & Steel Co Ltd (Baosteel) last Friday to take advantage of growing demand.
"Price rises by steel mills reflect climbing prices in the spot market since the end of July as steel mills received strong bookings in August. Steel prices are expected to increase next month as traders and end users need to build up stocks as demand improves," said Bill Chen, a senior trader with Hong Kong-based Smart Timing Steel Ltd.
Baosteel, the country's biggest-listed steelmaker, said last Friday that it would raise prices for hot-rolled coil by 60 yuan ($9) per tonne and cold-rolled coil prices by 120 yuan per tonne for September, in line with market expectations.
Baosteel usually sets the tone in pricing direction for the domestic steel market, followed by domestic rivals.
Wuhan Steel, the country's third-largest producer, plans to raise hot-rolled coil prices by 100 yuan per tonne and cold-rolled coil prices by 120 yuan per tonne, respectively, in line with Baosteel's increases.
Shougang will lift cold-rolled coil prices by 50 yuan per tonne, but has yet to make a decision on hot-rolled coil.
Another major mill, Angang Steel Co Ltd is expected to announce new prices later this week.
STEEL DEMAND TO REMAIN STRONG
Steel demand in China is expected to remain robust as the world's second-largest economy aims to maintain strong growth boosted by its continued investment in urbanisation and industrialisation, the China Iron & Steel Association (CISA) said on Tuesday.
"The engine driving up China's economic growth will still be powerful due to rapid investment growth, which will support steel demand in the near future," CISA said in a monthly report published on its website.
CISA also expects that China's steel exports will continue to stay relatively high, supporting steel demand.
China's economy would grow 9.2 percent in the third quarter, slightly down from the first two quarters of the year, a think tank under China's National Development and Reform Commission, the economic planning agency, said in a report.
Inventories of five main steel products - hot-rolled coil, cold-rolled coil, plate, wire rod and rebar - fell for the fourth straight month by 3.24 percent to 13.85 million tonnes in 26 major cities by end of July from the previous month.
"Large-scale construction of social housing and water conservancy as well as railway projects will continue to boost demand for construction steel products, while flat steel product mills will face growing competition as its end users including shipbuilding, auto and machinery see slower growth," CISA said.
Data from the report also showed that rebar spot prices rose 0.85 percent at end July from a month ago, wire rod price gained 1.51 percent and hot-rolled coil price rose 0.43 percent during the same period, while almost all other flat steel products fell modestly in July.
"Chinese steel mills will still face high production costs in the near future, narrowing the room for prices to fall in a large way," CISA added.
Prices of spot iron ore gained 1.5 percent in July from June, while coking coal prices jumped 2 percent from a month earlier.
($1 = 6.390 yuan)
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