Singapore (Platts)--28Jan2013/404 pm EST/2104 GMT

Domestic prices of steelmaking pig iron in North China's Hebei province rose by Yuan 100/mt ($16/mt), or around 4%, over the past one month, reflecting the continuous uptrend in domestic steel prices, market sources said Monday.

As of January 28, transaction prices for grade L8 and L10 pig iron -- the commodity's mainstream grades -- reached Yuan 2,800-2,850/mt, up from Yuan 2,700-2,750/mt on December 28. Both prices include 17% VAT, sources noted.

Offers in Hebei were as high as Yuan 2,950-3,000/mt, they said. Chinese domestic prices of flat rolled carbon steel have risen by about 14% since end-December.

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"Pig iron transaction prices over the month topped Yuan 2,900/mt when imported iron ore prices approached $160/mt CFR China. But prices retreated afterwards when iron ore softened," an official from a local steel mill said.

Market participants were confident that prices will remain stable over the coming month and might even increase slightly, but were concerned about prices from March. "Steel mills and trading houses are generally optimistic about steel demand this year, and this is encouraging China's top-tier steel mills to raise their list prices for the first quarter," an official from a second local steel mill said.

But this optimism will be tested in March when China's political leaders gather in Beijing to finalize the country's economic development and government policies for 2013, the mill official said.

"The steel market will be disappointed if the central government fails to release any concrete stimulus policies," he said, adding that the absence of such announcements will pressure domestic steel prices.

For 2012, China produced 657.9 million mt of pig iron, up 3.7% year on year, according to China's National Bureau of Statistics.

--Hongmei Li, hongmei-li@platts.com
--Edited by Russ McCulloch, russ_mcculloch@platts.com, and Haripriya
Banerjee, haripriya_banerjee@platts.com

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