UPDATE 2-China's Baosteel cuts Q4 prices as demand weakens

(Adds background, analyst comment)

By Alfred Cang

SHANGHAI Aug 25 (Reuters) - China's Baoshan Iron and Steel (600019.SS) (Baosteel) has cut its fourth-quarter sales prices for cold-rolled steel products, the first cut in a year, as the demand outlook weakens in China's auto and home appliance sectors.

Baosteel, the listed unit of China's largest steel mill, lowered cold-rolled steel product prices by 300 yuan from the third quarter, while keeping its hot-rolled steel product prices unchanged, trade sources said on Monday.

An official in the office of Baosteel's board had no comment, while a senior Baosteel official told Reuters on Friday that the company may not publish uniform steel product prices for the fourth quarter. The company did not announce prices for the third quarter.

The decision to keep hot-rolled prices unchanged reflected high global steel prices relative to China's and expectations of firm demand worldwide in the fourth quarter, analysts said.

"Baosteel's pricing is within the market's expectations. We have already seen weak demand for cold-rolled coil due to a slowdown in the auto and home appliance industries," one trader said.

The price for cold-rolled steel, excluding value-added tax, is 6,496 yuan ($949.30) per tonne for September, while the price for hot-rolled steel is 5,742 yuan, traders said, citing offers from the company.

Traders have said Baosteel recently began adjusting its quarterly offer prices each month to more closely reflect market conditions. The fourth-quarter prices will be in comparison with the revised September figures.

DOMESTIC DEMAND

Prices have risen sharply from 4,696 yuan for cold-rolled steel and 3,742 yuan for hot-rolled steel in the fourth quarter of last year, as soaring costs of production materials such as iron ore and coke spurred price increases worldwide.

The trade sources said the latest price reduction for cold-rolled steel would also narrow a long-standing gap between Baosteel's prices and market prices, as competition in the industry intensifies.

China is now emerging from the summer season of sluggish demand, exacerbated this year by monetary tightening and factory closures to boost air quality during the Beijing Olympics.

Shares in Maanshan Iron and Steel (0323.HK) tumbled nearly 8 percent on Monday and Angang Steel (0347.HK) slipped 0.75 percent after a broker downgrade due to concerns over slowing steel demand for construction work in China.

Shares in Baosteel dropped 1 percent to 6.69 yuan, underperforming a 0.3 percent gain in Shanghai's key index .SSEC.

However, some analysts said the unchanged prices for hot-rolled steel reflected Baosteel's bullish outlook for the market for the remainder of the year, due to rising demand in emerging markets and tightening supplies.

"People are taking about a 'decoupling' in the world economy. Demand is still strong in developing countries despite a slowdown in the U.S. and Europe, so we expect steel prices to hold up globally," said analyst Helen Lau at Daiwa Securities.

She expected other major Asian steelmakers such as Nippon Steel Corp (5401.T) and South Korea's POSCO (005490.KS) to keep their prices unchanged or make slight downward adjustments. ($1=6.843 Yuan) (Editing by Edmund Klamann and Jason Neely)