TAIPEI: China Steel, Taiwan's top steel maker, will raise its domestic product prices by 8.6 percent in October-November in response to a recovery of demand following the global economic meltdown, the company said yesterday.

The rise, which followed the firm's biggest increase in a year in September, was roughly in line with market expectations of an 8 percent rise.

It's also the first time the company has raised prices since June.

The company said that the bottoming out of global economy has stimulated demand for steel. Though many US and European steel makers have resumed production, the global supply is still tight.

With the imminent price hike, China Steel's domestic product prices will still be slightly below the international level, the company said.

Some analysts said China Steel could raise its prices further, as re-stocking demand by rivals in Europe and the United States outweighed mainland rivals's expected price cuts.

"Globally, the pressure of an industry-wide inventory correction will not be huge," said an analyst at First Global Securities Investment Trust. "We are positive about the sector's outlook throughout the first half of next year."

Earlier this week, several major mainland steel mills slashed prices for September sales by up to 19 percent from their August levels, industry consultancy Umetal said. Spot prices have continued to fall on weak demand.

The price cuts come as mainland spot steel prices languish amid concerns that tighter bank lending, the government's crackdown on overcapacity in the steel industry and record output may end the months-long price rally.

L. M. Chung, a vice-president at China Steel, told Reuters that the possible price cut by mainland rivals, including Baosteel, poses no pressure on China Steel.

"Their prices have been too high," he said.

He said the company hoped the price increases are going to help profitability for the year.

But he refrained from commenting on profit expectations, saying there were many factors at play in the last quarter.

China Steel increased product prices by 7 percent in June, its first price hike since the economic crisis pummeled demand for steel.

The company used to adjust prices every three months or so in the previous year, but started announcing price changes twice a quarter earlier this year to better reflect global markets.

Reuters

(HK Edition 09/04/2009 page2)