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Steel prices set for a big increase

China Steel Corp (中鋼), the nation's largest maker of the metal, said sellers of coking coal are asking buyers to pay as much as twice last year's prices because of reduced supplies from China and Australia.

Kaohsiung-based China Steel, which buys about 6 million tonnes of coal a year, is negotiating with international suppliers on this year's prices, executive vice president Chung Lo-min (鍾樂民) said yesterday by telephone. Talks may be completed next month, he said.

Hard coking coal, a premium variety used as a raw material by steelmakers, will sell at US$225 a tonne this year, compared with a previous forecast of US$150, Macquarie Bank Ltd said yesterday. Prices have climbed as bad weather cuts deliveries from Australia and China while South Africa diverts exports to the domestic market.

"Over the long term, or about five years, the rising prices aren't sustainable," Chung said. "Such increases will affect demand."

The Taiwanese steelmaker agreed to pay 65 percent more for iron ore supplied under contract by Cia Vale do Rio Doce, Rio de Janeiro-based Vale said yesterday. China Steel may raise product prices in the second quarter to cover higher expenses, Chung said last month. The company plans to announce costs for Taiwanese customers, such as automakers, shipbuilders and construction companies, on March 6. The mill has increased prices for eight straight quarters.

"We expect China Steel Corp to announce Q2 price increases next week," HSBC Holdings Plc analysts Daniel Kang and Sarah Mak, who rate the stock "overweight," wrote in a report yesterday. "The recent steel price surge, if maintained, will enable margins to significantly grow."

Baoshan Iron & Steel Co (寶鋼), the publicly traded unit of China's largest steelmaker, yesterday said it will raise prices for hot-rolled products by 20 percent and cold-rolled steel by 17 percent next quarter.
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