Baosteel, China''s largest iron and steel maker, has raised steel prices for the second quarter of 2008 after it agreed with Brazilian iron ore supplier Vale on a 65percent price hike this year.

    Prices of major cold- and hot-rolled products will increase by 800 yuan (111 U.S. dollars) per ton in the April-June period, compared with the January-March period, Tuesday''s China Securities Journal quoted an announcement by Baosteel as saying.

    Ultra-low carbon steel and high carbon steel will see a price rise of 800 yuan a ton and the price of steel cable will climb 600 yuan.

    Considering that Baosteel has a heavier reliance on imported iron ore than other domestic competitors, a 65-percent iron ore price rise could translate into a cost mark-up of 258 yuan for Baosteel, as against 116 yuan for other domestic steel makers, according to Chemease, a business information provider on Chinese chemical commodity markets.

    A steel price hike by up to 800 yuan will not only offset its cost mark-up but also allow substantial room to make profit, said Chemease analysts.

    The hefty price hike shows Baosteel''s confidence in this year''s steel market, said Du Hui, steel industry analyst with Chemease, who added that further price rises by the steel giant are very likely in the third and fourth quarters.

    An official with Baosteel said the company has also stepped up its focus on high-end products for a better bottom line.

    The sector may see profits peak in the second quarter, said Zhou Xizeng, a steel industry analyst with Citic Securities.

    Downstream industries such as shipping and construction will fully absorb the cost increase, but hardware and mechanical industries might be dealt with a heavy blow, said Du.

    China''s daily steel output has shown signs of shrinking since the end of last year, due to limited iron ore supplies and soaring costs. Runaway iron ore prices have also pushed steel prices up significantly. Prices of major types of steel nationwide increased by more than 400 yuan from Feb. 18 and Feb. 24, according to Mysteel, an industry information website.

    China, the world''s largest steel producer and consumer, imported 383 million tons of iron ore in 2007, up 17.4 percent year-on-year, according to the China Iron and Steel Association.

    Baosteel slipped 0.62 percent to 17.56 yuan on the Shanghai Stock Exchange on Monday.