Baosteel initially raise price, the ore negotiation to be tougher

[metalbiz888]

Baosteel announced to adjust up most steel products for January of 2010 on December 10, a range of 300-600 yuan per ton. The price adjustment meant that the main products prices of Baosteel would be return back to the high levels of 2009. Baosteel regarded as price wide vane plays a dominant role in pricing.

It is worried that such price rising may stimulate steel mills to speed up production. At the same time, the increase of steel price will cause raw material prices such as iron ore and coking coal to ascend. Under the situation of the higher cost, if demand does not rally, the steel price is bound to drop and steel mills will face more serious state.

Steel mills seem to expect offset the increasing cost from higher negotiation price by adjustment. A senior industry insider said that on one hand, Baosteel negotiates as negotiation delegate, one the other hand, from the perspective of enterprises’ operation, it reduces enterprises’ risks by advancing steel price. Obviously, the conflictive way usually makes negotiation more difficult.

“Actually, such price adjustment intensified China’s disadvantage stance in the negotiation”, analysts said. He thought that China’s steel price should keep stable, which is beneficial to China in price talks. To increase price beforehand only makes China more passive in the negotiation”.

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[metalbiz888]

Baosteel: to increase price in accordance with market demand

Ma Guoqiang, general manager from Baosteel explained the company’s price lifting strategy in the interview on December 16. He said that “it is mainly determined by both sides of supply and demand and is in line with the recent market as well as the inventory”.

After price increase, large steel enterprises such as WISCO also raise its price. Some people argued that the chain price rising is not favorable for the elimination of excess capacity and the new round of iron ore price negotiation. Certainly the price increase affected the expectation of the iron ore suppliers to some extent, but as a listed company, Baosteel should consider the interests of shareholders rather than curb the price increase for iron ore negotiation. In fact, steel enterprises such as Baosteel take an optimistic attitude toward the demand in latter market and believe their stocks are in a normal level. Based on this, enterprises and some experts thought the steel price would present a rising tendency with stability.

Steel demand and the price will both change significantly in 2010. Till now, stocks of raw material and finished products in Baosteel are basically in a normal level.

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