TAIPEI: Signs of recovery in the global economy have prompted Taiwan's top steel maker, China Steel, to raise domestic prices 9.4 percent in September. It's the biggest increase in a year and comes amid growing demand.

China Steel, whose announcement came after similar moves by bigger regional rivals such as the mainland's Baosteel, expects prices to rise even more this year as a global recovery boosts demand in everything from consumer goods to infrastructure projects.

"We've seen demand recovering after hitting bottom around April," L. M. Chung, a company vice president, told Reuters by telephone. "More price upside is likely at least throughout this year, as long as there is no abrupt surge in output in other countries."

The price adjustment, China Steel's second straight rise this year, was on the higher end of the 5-10 percent rise expected by some analysts and wider than a 7 percent increase for July and August.

It was also the biggest increase since the third quarter of last year, when China Steel raised prices by 17.8 percent from the previous quarter.

The company had adjusted prices every three months over the last year or so, but started announcing price changes twice a quarter earlier this year to reflect trends in global markets

Other steel makers in Asia have also pushed up prices in recent months.

Baosteel said earlier this month it would raise prices for major steel products by 9 to 13 percent next month, a move that may suggest mills have effectively given up their battle for lower iron ore prices.

"China Steel's bottom line is improving quarter by quarter," said Peter Zeng, an analyst at Polaris Securities.

The company had posted a net loss of NT$7.18 billion ($219 million) in the first quarter, but managed to post a pre-tax profit of NT$774 million in the second quarter.

Zeng expects China Steel to continue to be in the black in the second half of the year, with an expected net profit of NT$4 billion for 2009, down from NT$24.03 billion in 2008.

Earlier in the month, China Steel said it planned to restart one of its key blast furnaces sooner than expected due to steady global prices, as inventories run down due to a demand pick up.

Yesterday, shares of China Steel ended up 3.5 percent and were the third-most active traded issue by turnover, while the main index rose 1.62 percent to close at a new 11-month high.

Reuters

(HK Edition 07/29/2009 page2)