UPDATE 2-China's Baosteel cuts prices as slowdown weighs

(Adds comments, writes through)

By Alfred Cang

SHANGHAI, Nov 28 (Reuters) - Baoshan Iron and Steel Co Ltd (600019.SS), the listed unit of China's largest steelmaker, will cut some steel prices in January and hold others steady after slashing them in an unscheduled mid-month cut in December.

Baosteel's prices are considered the benchmark in China, the world's top steel producer and consumer, which has experienced a huge slowdown in demand because of the global financial crisis and a residential housing slump.

Price cuts, however, may not mean lower profits for Baosteel in January than in previous months because the cost of major raw materials has also plunged, analysts said.

"According to my rough estimate, Baosteel's profitability in January could be better than in December, as the price decreases in materials such as coking coal would be larger that the size of its price cuts," said analyst Yang Baofeng at Orient Securities.

Baosteel's January price for cold-rolled steel was unchanged from a revised December price issued last week, when a continued slump in spot market prices prompted an unprecedented adjustment to its monthly price tags.

Three sources who obtained information from Baosteel's sales department said on Friday that the benchmark price for cold-rolled steel products would be 3,626 yuan ($530.60) per tonne in January, down 970 yuan, or 21 percent, from the initial December offer price.

The benchmark price for hot-rolled steel products was set at 3,242 yuan per tonne, down 700 yuan, or 18 percent, from the initial December price, sources said.

For a table showing prices of two major Baosteel products for 2008 and January 2009, please click on [ID:nSHA66110].

Baosteel has said it expected losses in the carbon and stainless steel business in the fourth quarter as prices slumped.

He Wenbo, the president of Baosteel's state-owned parent company, told an internal briefing the market crisis had slashed the company's output, sales volume and profits, marking one of the most difficult periods of its history, Baosteel Daily, the company's newspaper, reported on Thursday.

Baosteel ceased publicly disclosing its offer prices in the second half of the year and has begun revising these on a monthly basis to more closely reflect price movements in the increasingly volatile market.

AN ASIAN CUT

Asian steel prices dropped 11 percent to their lowest level in two years this week despite further price and output cuts by yet more steelmakers, as demand continued to weaken amid fears of a deeper economic recession.

Demand growth from shipbuilders, the least affected by the spreading economic crisis, thanks to multi-year order backlogs, has also weakened as new orders slow to a trickle, forcing steel mills to cut prices of inputs such as semi-finished steel. [ID:nSEO158723]