* Last cut was in September, kept prices steady in May
* Underlines worries over demand outlook
* Steel supply glut may weigh on prices
By Ruby Lian and Fayen Wong
SHANGHAI, May 9 China's biggest listed
steelmaker, Baoshan Iron & Steel, will cut its main
steel product prices for June, its first reduction in nine
months and underscoring demand worries amid a fragile economic
Pricing moves by the firm, known as Baosteel, usually set
the tone for the wider steel sector in the country, with the cut
coming as China's steel demand falls short of expectations and
as a supply glut worsens.
With high raw material prices already forcing some
steelmakers into the red in recent months, mills could start to
cut production, weighing on iron ore and coking coal prices and
denting profits at global mining giants such as BHP Billiton
and Rio Tinto .
Baosteel, which kept May prices steady after five straight
months of hikes, will cut June prices of hot-rolled coil mainly
for manufacturing by 180 yuan ($29) a tonne and cold-rolled
coil, principally for autos and domestic appliances, by 150 yuan
a tonne, the company said on Thursday.
"Baosteel has already been giving discounts of up to 200
yuan a tonne for May bookings even though it had announced that
it would keep prices steady," said Qiu Yuecheng, an analyst with
steel trading platform Xiben New Line Co Ltd in Shanghai.
"The decision to cut June prices suggests it is having
difficulties in getting orders."
Baosteel, which competes with firms such as Wuhan Iron and
Steel and Angang Steel, does not publish
the latest prices for its products. Spot prices of hot-rolled
coil are hovering at about 3,600 yuan a tonne, after shedding
some 600 yuan in the past three months, data from Xiben showed.
Burdened with massive stockpiles of steel and slowing demand
growth, some loss-making Chinese traders have lobbied mills for
rebates on metal that has fallen in value since they bought it.
Demand for steel in China, the world's largest consumer and
producer of the metal, usually peaks during the second quarter
before entering a lull from June through August as construction
activity slows during the searing summer heat.
But despite signs of a weak demand pick-up and declining
margins, China's army of steel makers churned out more than 2
million tonnes a day in April. Average daily crude steel output
struck a record 2.129 million tonnes late that month.
Analysts have warned that record steel output, slow sales
and tight cash flow will weigh on steel and iron ore markets.
"Maybe Chinese mills will cut their production going
forward. But cut to what extent? Cutting a bit will have no
impact," said Helen Lau, senior mining analyst at UOB-Kay Hian
in Hong Kong.
The most active rebar futures for October delivery on the
Shanghai Futures Exchange traded 0.63 percent lower at
3,623 yuan a tonne by the midday break. They earlier rose to the
highest since April 26 at 3,674 yuan.
Benchmark 62 percent grade iron ore rebounded
from near a five-month low to $130 a tonne on Wednesday. It hit
$158.9, its highest for the year so far, on Feb. 20.
Shares in Baosteel, which fell 3.3 percent last quarter,
were down 0.2 percent at midday.