Posted on 02 Sep 2009
Several major Chinese steel mills cut their product prices for September sales by up to 19 percent from their August levels on Tuesday, industry consultancy Umetal said, as spot prices continued to fall on weak demand.
The price cuts come as Chinese spot steel prices languish amid concerns that tighter bank lending, the government's crackdown on overcapacity in the steel industry and record output, may end the months-long price rally.
Spot price of iron ore, a key steelmaking ingredient, have also been volatile recently, falling to a more than two-month low on Tuesday.
Hebei Iron and Steel Group, the country's No. 2 steelmaker, lowered the price for its major reinforcing steel bar by 950 yuan, or 19 percent, to 3,950 yuan ($578.3) a tonne, effective on Tuesday, Umetal said citing
Shagang Group,
The two companies also cut prices for hot-rolled and cold-rolled steel by between 100-150 yuan a tonne, depending on quality, in their first reduction since May.
"We expect more major mills to follow suit because of the need to destock while maintaining full operational capacity to generate cash flow," Deutsche Bank analyst Julian Zhu said.
Baoshan Iron and Steel Co, the major unit of the country's largest steelmaker, is expected to lower sale prices for major hot-rolled and cold-rolled steel products for October next week after raising them since July, trade sources said.
The price cuts made by steel mills could further weigh on the steel futures prices in Shanghai, with the most-active rebar futures contract SRBc3 falling around 18 percent from its peak in early August. ($1=6.830 Yuan)
