Baosteel’s latest flat steel price cut ‘no surprise’, says JP Morgan

Investment bank JP Morgan said the July delivery price cut implemented by Baoshan Iron & Steel (Baosteel) comes as “no surprise” given the downward trend in Chinese spot prices.

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On Saturday June 8, Baosteel reduced its domestic prices on major products for July delivery, with hot rolled coil (HRC) and cold rolled coil (CRC) both cut by 200 yuan ($32) per tonne.

This is the Chinese mill’s second price cut in as many months. In May, Boasteel reduced its list prices by 150-180 yuan ($24-29) for June deliveries. 

“Chinese spot prices have been falling since the end of the Lunar New Year holiday, making Baosteel’s price cut simply part of the larger trend in our estimation,” JP Morgan said in a research note seen by Steel First.

“Chinese crude steel production has recently begun declining, which has spot prices showing signs of a bottom. Given this, we think Baosteel’s move could generate expectations for a bottom in Chinese domestic steel prices,” the note said.

The investment bank said that both Baosteel and Angang Steel expect prices to hit the floor in June before a recovery in the third quarter this year.