Baosteel will raise flat steel prices in January

Baosteel raised domestic sales prices for HR, CR and flat products in January by 400 yuan per ton, 500 yuan per ton and 300 yuan per ton, respectively. The increase in sales prices was driven by higher prices for iron ore and strong demand. Despite the recent high prices for iron ore, costs are expected to continue rising due to increased demand from the processing industries and reduced inventories.

Amid rising iron ore prices, Baosteel sharply

Raises flat prices in January 2021 The Chinese company Baosteel (600019.SH) decided to raise domestic retail prices for HR, CR and flat products in January by 400 yuan per ton, 500 yuan per ton and 300 yuan per ton. tonnes, respectively, with the aim of shifting cost increases from the recently soaring iron ore prices to product prices. Strong demand also influenced the decision to raise prices. Since 2H20, stable demand for cars and home appliances has led to a steady demand for CR products. Against this background, the company has been raising prices for CR distribution since July. In January, the CR distribution price will be increased by RMB 500 per ton.

While Baosteel predicts that raw material costs will rise in Q1 2021 due to the recent surge in iron ore prices, Baosteel believes it can avoid falling profitability by passing the cost increase to product prices. Following the announcement of January distribution prices, Baosteel shares closed 4.1% higher than the day before on December 10.

Rapid reduction in inventories to support “cost increases” As of December 10, China's steel inventories stood at 8.84 million tonnes (+ 18.9% YoY), a decline for the ninth straight week. While HR and rebar stocks rose 20.5% and 36.8% YoY, respectively, CR stocks are currently down 2.4% YoY.

Domestic retail prices for HR and CR products in China continue to rise daily. On December 10, the HR price reached 4,483 yuan per ton, the highest level in three years. Meanwhile, the price of CR exceeded 5,390 yuan per ton, the highest since October 2011. Also reflecting healthy demand in the downstream industry, the CR-HR price spread recently widened to RMB 907 per tonne.

The price of Australian iron ore (Fe 61%) imported into China also followed a day-to-day uptrend and reached $ 156.9 /t on December 10. Although iron ore prices are high, demand from refiners is increasing and its distribution stocks are rapidly declining. Accordingly, price increases are expected to drive steel prices higher in the future.