POSCO sees steel price weakness temporary

SEOUL Fri Sep 19, 2008 1:06pm BST

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SEOUL (Reuters) - POSCO (005490.KS), the world's No.4 steelmaker, expects steel prices to stay firm, amid rising concerns that falling prices in China on weak domestic consumption may spread across the world, a senior official said.

"Export prices are strong and domestic steel prices are also holding up well," Hwang Eun-yeon, POSCO's senior vice president of marketing strategy, told Reuters late on Thursday.

"Prices may come under pressure for some time but we expect China would take some steps to shore up domestic demand, (if it worsens further) and help boost overall steel prices."

China's steel exports jumped to record highs in the past two months as slowing economic growth dampened domestic prices, forcing steel mills to go overseas in hopes of better pricing.

Global steel prices have also weakened this summer, led by long steel products used mainly in the construction industry, on the credit crisis and troubled housing markets.

In the latest move to shore up steel prices by global steel firms struggling with soaring raw material costs, ArcelorMittal (ISPA.AS), the world's largest steelmaker, said on Thursday it was preparing to reduce production by up to 15 percent. [nLH359717]

The steel giant said it had already cut production in Ukraine and Kazakhstan by 15-20 percent and further output cuts would be focused on long steel products and on Europe and the United States.

Signs of a softening price outlook have increased in recent months, with China's Baosteel (600019.SS) cutting prices for cold-rolled steel products for the fourth quarter due to weak demand from the auto and home appliances sectors.

POSCO mainly produces flat steel products such as heavy plates, for which prices have soared on strong demand from the shipuilding industry.

Shares in POSCO, South Korea's second-largest company by market value, rose 3.5 percent to 432,500 won by 0010 GMT, versus a 3.2 percent gain in the broader market .KS11.

(Reporting by Miyoung Kim; Editing by Keiron Henderson and Jonathan Hopfner)

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