UPDATE 1-China's Baosteel cuts main steel product prices for August

Thu Jul 12, 2012 5:55am EDT

Related Topics

* Baosteel cuts main product prices by 200 to 260 yuan/T

* Further demand slowdown seen in July and August

* Beijing's measures unlikely to provide a quick lift

* Slowing economic growth hits corporate earnings (Adds analyst quote, details)

By Ruby Lian and Jason Subler

SHANGHAI, July 12 (Reuters) - China's biggest listed steelmaker, Baoshan Iron & Steel, will cut August prices of its main products by 4.6 percent to 5.6 percent, after its first reduction in 2012 this month, suggesting the company lacks confidence in the market near-term.

Baosteel's pricing decisions are generally regarded as a bellwether for the industry. While demand generally weakens in China's hot summer months as construction projects slow, sluggish economic growth and a fragile global economy are putting particular pressure on the company this year.

China's steel industry is expected to see low demand in July and August until a seasonal pickup in September, and expectations of more efforts by Beijing to boost the economy are unlikely to provide an immediate boost to steel prices, analysts say.

"The July-August period could see a bottoming out, given demand remains tepid," said Hu Zhengwu, an analyst with China industry consultancy Custeel.com.

"It'll take time for Beijing to approve and place money into more infrastructure projects, while there may not be as many construction projects as we had expected," he added.

Shanghai-based Baosteel will slash hot-rolled coil prices by 200 yuan ($31) per tonne and cold-rolled coil prices by 260 yuan ($41) per tonne for August bookings.

The shaky global economy and slumping domestic growth are hammering Chinese companies, leading to a series of profit warnings by firms ranging from steelmakers to airlines.

Angang Steel Co Ltd estimated a net loss of around 2 billion yuan ($309 million) in the first half of 2012, mainly due to slumping steel prices.

More broadly, some analysts say that even if the economy picks back up in the second half, it could take more time for corporate earnings to rebound.

"A pick-up of actual GDP growth may come earlier than a recovery of corporate earnings as inflation is slowing at a faster-than-expected pace and such a trend may last until October, which will keep dragging down their profits," said Chen Li, head of China equity strategy at UBS. (Addtional reporting by Aileen Wang in Beijing; Editing by Clarence Fernandez)

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