China's Baosteel announced it would raise the February steel prices on Jan 11, a move that may be followed by other domestic smelters, China Business News reported Wednesday.
It is the sixth consecutive month for the steelmaker to raise steel prices since August 2010, when it tuned down prices, according to the paper.
Baosteel is to increase February prices for major products by 50 yuan, to 300 yuan, except for electro-galvanizing, which will remain at the previous level.
The rise of raw material prices serves as a major impetus behind Baosteel's move, and its influence is to continue, said Hu Yanping, an analyst at umetal.com.
Hu said other steelmakers, such as Ansteel and Wuhan Iron and Steel, are likely to follow Baosteel, raising their prices by 100 yuan to 200 yuan. He expects steel prices to rise in the coming months.
However, price hikes may not turn into profits, due to raw material price hikes and other adverse factors.
Prices for 63-grade India iron ore hit a 10-month high, at $180 per ton on Jan 11, according to the paper.
China's iron ore imports fell in 2010, the first time in 12 years, according to the Customs. But average CIF prices of iron ores that year surged 59.5 percent from 2009.
Meanwhile, some steelmakers approached by the paper expect steel prices to fluctuate this year, which may show a moderate rising trend at the beginning, but eventually fall.
Confronted with inflation, and China's energy-cut efforts, costs at steel mills may rise further, resulting in a narrower profit margin for them, said Cai Jin, director of China Logistics Information Center.
The profit rate of China's steel industry was a meager 3.5 percent in 2010, which is the lowest among all industries, and is far below the average level of 6 percent for all industries.