The Kaohsiung-based firm said the adjustments would not fully reflect increases in raw material costs, but it favors a moderate approach to give downstream firms room and time to brace for the turnaround in the business cycle.

In view of the Lunar New Year holiday next week, it adopted a lenient and progressive pricing strategy, the nation’s largest steelmaker said.

The China Steel Corp logo is pictured outside the company’s headquarters in Kaohsiung in an undated photograph.

Photo courtesy of China Steel Corp

It is the second straight month that China Steel raised prices of hot-rolled plate and cold-rolled coils, which are commonly used in construction and vehicle manufacturing.

Pent-up consumption demand from China grew more evident this month, after Beijing last month scrapped its “zero COVID-19” policy, paving the way for inventory replenishment at steel suppliers, the company said.

China’s measures to stimulate economic activity would lend support to the real-estate and automotive sectors, which are two major buyers of steel products, it said.

The removal of lockdowns would dissolve supply chain bottlenecks that have tethered vehicle production and deliveries for the past three years, it said.

The World Steel Association, which earlier projected a meager 1 percent increase in global steel demand to 1.815 tonnes this year, is likely to revise its guidance upward, China Steel said.

S&P Global Ratings projects a 5.6 percent advance in vehicle production to 83.6 million units this year, as chip shortages are expected to ease, the company added.

On the supply side, the capacity reduction of major global players has begun to bear fruit, after European peers last year cut crude steel production by 40 percent, or 64 million tonnes, and Chinese steelmakers reduced crude steel output by 2.2 percent, the company said.

World Steel Dynamics, a leading analytics and research firm specializing in global steel industry trends, said crude steel output might drop 1.5 percent to 18.22 tonnes this year, fueling an inventory ramp-up next month.

China-based Baowu Steel Group (寶武鋼鐵), the world’s biggest steelmaker, previously announced increases of 50 yuan to 100 yuan (US$7 to US$15) per tonne in factory prices for next month, China Steel said.

A U-shape recovery in steel prices is expected, the company said, urging peers in the supply chain to build up necessary raw materials as an upward trend unfolds.