BRIEFS

GENERAL

PBOC lifts base lending rates

The People's Bank of China, the central bank, raised base lending rates by 27 basis points to 5.85 percent in an effort to cool the economy, but left deposit rates unchanged at 2.25 percent. It was the first policy rate adjustment since October 2004 and follows recent announcements that first-quarter GDP, fixed-asset investment and credit growth rates had all exceeded targets. Analysts took the moderate rise as an indication that the government would proceed slowly with plans to use market-oriented measures to fine-tune the economy. Mainland banks were expected to raise mortgage rates in response, but the impact was likely to be minimal since interest rates are still low, while some equities sectors may be negatively affected. Analysts had predicted a tightening of monetary policy, but most had predicted a hike in reserve requirements for commercial banks. Deutsche Bank said further monetary tightening was possible through further rate hikes or a lifting of reserve requirements if the economy did not cool sufficiently.

Beijing steps up controls

The government unveiled a fresh round of macroeconomic controls in an effort to curb overinvestment in key sectors and keep a tighter hold on land and lending. After the economy grew by 10.2 percent year-on-year in the first quarter, fears of overheating were reignited. "[We] must strengthen adjustments in fixed-asset investment and tighten the controls over land and credit," the National Development and Reform Commission said on its website. "New projects must conform to state industrial policies and market standards and we must prevent excessive investment in some industries and regions." The watchdog said there was oversupply in the aluminium and cement industries driven by overinvestment. Fixed-asset investment grew by 27.7 percent in the first quarter of 2006 compared with the year before.

Chen can't halt mainland investment

Taiwan authorities approved 238 mainland-bound investments worth US$1.76 billion in the first three months of the year, up 46.31 percent year-on-year, despite a recent order by President Chen Shui-bian to tighten up on such activities. The island's Ministry of Economic Affairs showed mainland investments last month amounted to US$853.4 million, up 65.7 percent from March 2005 and almost double the island's US$483.2 million in investment in regions other than the mainland. Chen has repeatedly warned against the overheating effect and potential risks of mainland-bound Taiwan investments.

Cheap labour drives trade gap: official

A National Bureau of Statistics official warned China's competitive labour costs would entrench China's trade surplus and drive up foreign exchange holdings over the next two decades. Bureau spokesman Zheng Jingping said further appreciation of the yuan would not resolve the issue, pointing out that Japan continued to enjoy a trade surplus with the United States, despite the sharp appreciation of the yen over the past three decades. Japan's trade surplus has climbed from US$10 billion in the 1970s to more than US$80 billion today, while the yen has risen from 380 to 110 to the US dollar. Zheng said the increasing trade surplus and foreign reserve holdings resulted from multinationals moving production bases to China to capitalize on low labour costs. Multinationals accounted for 58.5 percent of the mainland's exports, he said.

Listings to resume soon

The China Securities and Regulatory Commission (CSRC) has announced that listings will soon resume on the Shanghai and Shenzhen stock exchanges following significant progress in the non-tradable to tradable share reform. The CSRC said private placements would return first, followed by rights shares and finally initial public offerings. The introduction of private placements will allow companies to sell large amounts of share capital directly to certain investors, which may include foreign strategic investors. The move came as part of a series of measures, including changes encouraging listed firms to pay dividends, plans for a more market-oriented system of pricing and timing of additional share offerings, and alterations aimed at making it easier to sell corporate bonds. The CSRC said it would accept public comments on the new rules until April 22 but gave no indication when they would come into effect.

Margin trading brings futures nearer

The China Securities Regulatory Commission plans to phase in margin trading and securities lending as it prepares to establish a new financial derivatives exchange in Shanghai next year. Margin trading - where investors put up a percentage for the stock they buy and the broker funds the rest - is expected to be implemented before the end of the year, but the regulator's plan does not yet extend to short-selling. A company will be established to provide loans to brokerages to finance margin trades. The move will pave the way for government plans to establish a financial futures exchange in Shanghai early next year.

China leads trademark applications

China has ranked first in the world in trademark applications for the past four years, according to official statistics from the China Achievements Exhibition for Intellectual Property Protection. The eight-day exhibition, which is part of China's 2006 Intellectual Property Rights Protection Week, is organized by China's 11 IPR-related governmental organizations. Figures show trademark applications filed in China grew by 25.2 percent annually from 2000, reaching 400,000 last year. A total of 2.499 million trademark applications had been filed in China by the end of 2005, including 442,000 from other countries. Trademark registration was first implemented in China in 1981. World Intellectual Property Organization figures show overseas trademark applications reached 1,334 last year, climbing 31.4 percent from 2004, and up from only four in 1989.

Central bank hands out fines

Six hundred financial institutions were fined a total of US$7 million for money laundering violations last year, state media reported. The People's Bank of China's centre for monitoring and analysing cases of suspected money laundering reviewed transactions worth US$10.8 billion in 2005. Those fined include the Shenzhen branch of Bank of Tokyo-Mitsubishi UFJ, which was asked to cough up US$150,000. No other institutions were named. In 2004, just 66 financial entities paid a total of US$212,000 in fines for money laundering violations.

Better property rights needed

Stronger private property rights are required to attract sufficient international investment to keep unemployment under control, People's Bank of China Vice Governor Wu Xiaoling told a conference in Beijing. Wu also called on the government to speed up the introduction of antitrust legislation, reduce its holdings in domestic companies and not interfere in asset sales to private investors. China is keen to reduce the number of state-owned companies through mergers in order to facilitate the emergence of a group of super-firms able to compete with foreign operators in an increasingly deregulated market. Kenneth Davies, senior economist at the Organization for Economic Cooperation and Development, echoed Wu's sentiments on private property rights, saying the current climate of uncertainty isn't conducive to M&A activity.

Trade to rise but surplus to fall

Foreign trade could rise by more than 12 percent this year to US$1.6 trillion, the Ministry of Commerce has said. But increasing imports and export pressure is likely to see China's trade surplus fall on the US$101.88 billion recorded for 2005, according to Li Yushi, vice-president of the ministry's Research Institute of Foreign Trade and Economic Co-operation. "Given no major changes in the international market, China will likely limit its trade surplus to within US$50 billion this year," he said. The country's foreign trade volume hit US$1.42 trillion last year, a 23.2 percent rise on 2004, while a US$23.3 billion trade surplus was recorded for the first quarter of 2006, up 41.1 percent on the same period in 2005. Chinese companies exported US$197.3 billion worth of goods in the first quarter, up 26.6 percent year on year, and imported US$174 billion worth of goods, up 24.8 percent. Liu Haiquan, vice-director of the Ministry of Commerce's Planning and Financial Affairs Division, said the trade surpluses would continue but that China faces pressure from calls for more balanced foreign trade, rising global interest rates and increasing resource prices.

Incomes climb 10 percent in Q1

People's incomes are continuing to rise following a series of government initiatives to stimulate domestic consumption, according to National Bureau of Statistics figures. Urban disposable income per capita rose 10.8 percent year-on-year in the first quarter to US$410.78 after allowing for price rises, against an 8.6 percent rise in the first quarter last year. Per capita disposable income for rural residents rose 11.5 percent to US$136.47, 0.4 percentage points lower than growth in the same period last year. But the National Development and Reform Commission's Economics Research Institute deputy director Yang Yiyong told the South China Morning Post that rising incomes did not imply corresponding growth in consumption because people tended to save due to uncertainties about jobs, medical care and retirement.

Fixed-asset investment growth blows target

China's fixed-asset investment rose 27.7 percent during the first quarter, exceeding the government's target growth of 18 percent for 2006, the National Bureau of Statistics announced recently. The growth rate was 4.9 percentage points higher than the same period last year. NBS spokesman Zheng Jingping said the rapid growth was one of a few prominent problems that called for the government's attention. Credit growth, which is related to fixed-asset investment growth, has also been too fast, Zheng said. Figures from the People's Bank of China show new loans grew 70 percent year-on-year in the first quarter to US$157.5 billion, already about half of the bank's US$312 billion loan growth target for the entire year.

GDP rises 10.2 percent in Q1

The country's GDP rose 10.2 percent during the first three months of the year thanks to rapid trade growth, President Hu Jintao announced in a televised address. This comes after China's economy grew 9.9 percent in 2005, including 9.9 percent in the final quarter, although Hu stressed that attention was now focused on efficiency and quality of development. "We are paying more attention to the transformation of the mode of growth, resource conservation, environmental protection and more importantly the improvement of the lives of the people," he said. These latest figures, on the back of earlier statistics showing a 41.4 percent year-on-year rise in China's first quarter trade surplus, are likely to intensify US calls for revaluation of the yuan during Hu's upcoming visit. At an earlier cabinet meeting, Premier Wen Jiabao said the main problems facing China's economy were "too rapid growth of investment and credit, a relatively high money supply and a structural contradiction of foreign trade".

Forex chief reiterates gradual reform

Hu Xiaolian, head of the State Administration of Foreign Exchange, has repeated China's decision to pursue gradual exchange rate reform in an essay published in Qiushi, one of the Communist Party's main theoretical journals, on the eve of President Hu Jintao's visit to the United States. Hu Xiaolian, also a vice governor of the central bank, said the surplus in international payments, boosted by China's enormous trade surplus, made domestic monetary policies more difficult. "In recent years, the huge surplus in international payments as well as excessive foreign exchange reserve growth has distorted domestic money supply," she wrote. "This makes it harder for China to leverage its monetary policy tools and jeopardizes the effect of macroeconomic controls." China's foreign exchange reserves are the world's largest at US$875.1 billion by the end of March.

Carmakers predict further growth

Ford plans to double sales in China during 2006 after a strong showing last year from its Changan Ford Mazda joint venture, which saw sales rise 41 percent on 2004 to hit 61,000. The company as a whole sold 220,000 vehicles in China last year, giving it a 1.5 percent market share to Volkswagen's 17.3 percent and General Motors' 11 percent. Ford is boosting its capacity in the country in the expectation of strong demand for smaller vehicles. Meanwhile, GM believes sales in China will rise by more than 20 percent to around 800,000 vehicles this year, led by the Buick Excelle sedan and eight or nine new models. GM sold 665,390 vehicles in China last year and the company has started 2006 brightly, boosting its market share from 11.2 percent to 13.5 percent. Profits climbed to US$70 million over the US$33 million recorded during the first three months of 2005. Shanghai General Motors, its largest mainland operation, sold more vehicles than any other manufacturer during the first quarter.

Move to boost car exports

A series of measures is under consideration that is intended to increase car exports. The government is said to be looking at raising export credits and insurance for manufacturers as well as offering greater support to companies developing their own brands. Furthermore, approval for new production facilities could be tied to greater export commitments. While this export drive would ease pressure on a domestic auto sector blighted by oversupply, it also indicates China's desire to make a name for itself in the international car market. The government has targeted a 10 percent share of global sales by the end of the next decade. Auto manufacturing capacity is set to reach 18 million cars a year by 2010 against likely demand of around 10 million.

Infineon launches car electronics facility

Infineon Technologies AG, the world's fourth-largest semiconductor manufacturer, announced the launch of the Tianjin University-Infineon Automotive Electronics Joint Lab in Tianjin. The facility, founded in conjunction with the State Key Lab of Engine and ICE Research Institute of Tianjin University, will concentrate on the research and development of engine electrical controls and technologies. The Munich-based company has invested nearly US$124,069 into the basic construction of the lab. Infineon predicts by 2010, the average content of electronics equipments in a vehicle will reach 35 percent.

BOC listing bonanza for investors

Bank of China is seeking regulatory approval before setting out to raise up to US$8 billion in Hong Kong in a listing that could leave overseas investors led by Royal Bank of Scotland with more than half that figure in profit. The news that the investors could double their money inside a year will clearly not go down well in China. The country's third-largest lender is to raise between US$6 billion and US$8 billion by selling 10 percent of its shares. The investors cannot sell the stakes for three years, but will be an obvious target for critics that say Beijing is selling off state assets too cheaply.

ICBC hopes for higher valuation

Industrial and Commercial Bank of China has suggested limiting the amount of shares in its up to US$15 billion international sale later this year as it chases a higher valuation. A preliminary listing plan from the mainland's largest commercial lender says 50 percent of the initial public offering should be new shares, with the rest sold from the bank's two government shareholders. ICBC hopes to boost its return on equity, with a target of 13.8 percent set for this year. China Construction Bank reported a 21.59 percent return on equity last year.

Banking sector assets up 19 percent

Total banking sector assets rose 19.2 percent to US$4.89 trillion at the end of March, China Banking Regulatory Commission figures show. The assets of the four largest state-owned commercial banks grew 17.4 percent year-on-year to US$2.6 trillion at the end of March, while assets belonging to the country's 12 second-tier banks climbed 26.9 percent to US$757.8 billion. City commercial banks' assets totalled US$261 billion, up 25.3 percent, while assets at other banking sector institutions, including policy banks, foreign banks and credit cooperatives, climbed 17.5 percent to US$1.28 trillion. Despite being out-performed by their smaller rivals, the big four banks held on to their dominant market position. At the end of March they accounted for 53 percent of China's total banking assets, down less than one percentage point from a year earlier.

Clouds over Citigroup bid

Foreign investors are unlikely to be allowed to purchase controlling stakes in China's small and medium-sized banks, threatening a Citigroup-led consortium's bid for an 85 percent stake in Guangdong Development Bank. China currently restricts foreign investors to a maximum of 25 percent equity, with individual investors capped at 20 percent, but the Citigroup consortium was hoping to receive an exemption. "The case of Guangdong Development Bank has been looked into many times by the China Banking Regulatory Commission (CBRC) and other related administrations, and it is hard to break the present restrictions on foreign strategic investor issues," CBRC said in a letter to the Guangdong Municipal Government, which is thought to be supportive of the deal. If Citigroup wins the bid, it would become the first overseas investor to buy control of a state-owned bank in China.

Bankers back faster reform

Foreign finance executives have endorsed faster financial reforms in China, claiming that restrictions still prevent overseas players from competing effectively in the country. According to WTO accession requirements, Beijing will allow foreign banks to conduct local currency business with domestic customers from December. But foreign banks must first meet a number of requirements if they want to open new branches and this is likely to slow down the pace at which they can expand in China. Stakes held by overseas institutions in domestic banks are still capped at 25 percent while the securities industry is not even covered in the WTO requirements. "The reform on the asset management and brokerage side and capital markets in general is too slow," said CLSA chairman Gary Coull, whose sentiments were echoed by Kevan Watts, chairman of Merrill Lynch International, in his call for "a faster-paced increase in foreign competition in the banking sector". Speaking to the Financial Times, Coull said the slowdown in approval for foreign investments could see China's mismanaged brokerages rack up further losses.

Banks to invest abroad

Commercial banks have been given the go-ahead to invest clients' money overseas. The central bank, the banking regulator and the foreign exchange regulator issued detailed rules governing the capital outflow on Tuesday. "This will widen domestic residents' investment channels in a positive and orderly way and is a key measure toward helping to balance the international balance of payments," a statement from the People's Bank of China said. Deposits at Chinese financial institutions were said to be US$3.97 trillion by the end of March. Commercial banks will have to obtain approval before investing funds abroad, and will be assigned quotas.

Cinda diversifies into fund management

Cinda Asset Management has taken a 54 percent stake in a joint venture with First State Investments, part of the Commonwealth Bank of Australia. The deal has not yet been officially announced but has received approval from the China Securities Regulatory Commission. Originally designed to dispose of non-performing loans run up by state banks, branching out into fund management is an important step for the AMC. Other AMCs could be potential targets for overseas fund managers looking for joint venture partners. First State's original China venture ended in 2004 with the collapse of its joint venture partner Hantang Securities.

CCB denies Bear Stearns "rumour"

China Construction Bank has denied entering into negotiations with Bear Stearns to buy a stake in the American investment bank, the Financial Times reported. Sources in New York said the bank was in talks with a 20 percent holding costing up to US$4 billion under consideration. "China Construction Bank has never had this kind of plan and has not had such discussions with Bear Stearns," the bank said in a statement on Tuesday. "We are unable to make any judgment as to where this rumour has come from." CCB's core business is lending to domestic businesses and individuals, so taking a minority stake in a US investment bank would seem to be quite a departure.

CCB denies poor disclosure

China Construction Bank has denied accusations of poor disclosure in its first annual report since listing late last year. "We have strictly followed the information disclosure rules of the Hong Kong stock exchange and domestic regulatory authorities," the bank said in response to criticism from analysts. A Goldman Sachs research note said CCB's disclosure of financial data was "disappointing". Citigroup criticized the bank for not explaining why its effective income tax rate of 20.6 percent in the second half of 2005 was lower than the projected figure of 40.2 percent and queried its US$162 million loss on foreign currency trading. CCB said the lower tax rate came as a result of changes to tax deductions on staff expenses while foreign exchange losses were caused by the yuan's rise against the dollar.

Qantas starts flights between Sydney and Beijing

Qantas Airways and Air China have signed a codeshare agreement on flights between Sydney and Beijing. The Australia-based airline began flights on May 15 and will allow its Chinese partner to sell seats on Qantas flights.

New air corridor opened

China has agreed to open a new corridor through its tightly restricted air space that could save airlines a total of US$30 million in annual fuel costs and trim an average of half an hour off flight times between China and Europe. Only 30 percent of China's airspace, which is controlled by the military, is open to civil aviation, making it one of the world's most restricted countries. The new route is the first of several steps the International Air Transport Association, the main trade group for the world's airlines, wants Chinese authorities to take to prevent lengthening delays on flights to and from China's biggest cities. Carriers likely to benefit include Air France-KLM, British Airways, Cathay Pacific Airways, Lufthansa, FedEx and United Parcel Service, which currently must follow rigid and often meandering routes, including doglegs and 90-degree turns. The concession follows six years of talks on the issue.

China Eastern seeks investor

China Eastern Airlines is in talks with three or four groups with a view to selecting one investor to take a minimum 20 percent stake in the company and help boost management operations. Company chairman Li Fenghua refused to say who was involved in the talks, but another official revealed that Singapore Airlines was among them. The airline, one of the three major state-run carriers alongside Air China and China Southern, recorded a net loss of US$58.4 million last year following profits of US$40 million in 2004. It blamed rising competition and high fuel prices for the decline.

China insurers start new investment scheme

China has launched a pilot scheme to let insurance firms invest in infrastructure, including highways, energy projects and urban facilities. The investment quota, which is the latest effort to widen insurers' investment options, for the trial scheme had been set at around US$1.5 billions and the pilot scheme was being led by Ping An Insurance and included China Life Insurance Co.

China progresses in social insurance programs

China's social insurance funds were increasing at an annual rate of 20 percent, hitting US$227.3 billion in 2005, equalling 10 percent of the gross domestic product. By last year, 173 million people had been covered by pension insurance, 137 million by basic medical insurance and 106 million by unemployment insurance. China has made good progress in improving social security by having vigorously expanded government-run social insurance programs in the past five years. Eighty million people were covered against occupational injury and 53.8 million for pre- and post-natal care. Apart from funding by the government, the social insurance programs also get contributions from both employers and employees, who pay monthly into the funds by varying proportions before retirement of the employees.

Goldman in surprise meat-bid win

A Goldman Sachs-led consortium has emerged victorious from a two-month auction process for China's biggest meat-processing company, Shuanghui Group. The investment will be around US$250 million and looks set to go ahead despite the firm holding a stake in a competing company. The victory, which is expected to be announced Friday, is a surprise given the bidding guidelines excluded major shareholders of companies in the same industry. Goldman already owns a 13 percent stake in China Yurun Food Group, a major Hong Kong-listed producer of chilled and frozen pork in China, and Shuanghui's biggest competitor. Goldman's consortium partner is CDH China Fund LP. Shuanghui Group is also known as Shineway Group.

China expands nuclear power station

China's first self-designed and self-made nuclear power station, Qinshan Nuclear Power Station, began another round of expansion, passing its second phase of technical assessment. The key to China's nuclear power development lies in raising its innovation capabilities and the training of high-tech management personnel, Wu Bangguo, Chairman of the National People's Congress Standing Committee, said in a letter of congratulation during the commencement ceremony. China plans to increase its nuclear power generating capacity to 40 million kilowatts by 2020, aiming to account for 4 percent of the country's total installed capacity at that time. Currently less than 2 percent of its electric power comes from nuclear generation.

Nigerian oil deal expected soon

China is poised to invest US$4 billion in Nigerian infrastructure projects in exchange for first refusal on drilling licenses for four oil exploration blocks. It is one of a number of agreements set to be signed by President Hu Jintao during his visit to the African country. Under the terms of the deal, China will buy a controlling stake in a state-run refinery and plough money into a railway line and power plants. In return, China National Petroleum Corp is now in prime position to start exploratory drilling at two sites in the Niger delta region and two sites in the Lake Chad basin. Nigeria, Africa's largest oil producer, has been the chief beneficiary for China's growing interest in the continent's energy assets. Last year PetroChina agreed to pay US$800 million for a 30,000 barrels-per-day supply, while in the last few days China National Offshore Oil Corp sealed a US$2.7 billion deal for a 45 percent stake in an oil block. In the past, most of Nigeria's oil ventures have been with US and European groups.

Hu discusses oil reserve

Talks have been held between President Hu Jintao and Saudi Arabian leader King Abdullah over the possibility of building a strategic oil reserve in China fed exclusively by Saudi suppliers. Discussions took place as part of Hu's visit to Saudi Arabia, which has already yielded a number of energy and defence deals. Coming just three months after King Abdullah visited China, the Chinese leader's trip is an indicator of fast-growing ties between Beijing and Riyadh. Supplies for the reserve, most likely located in a coastal city in the southeast of the country, would come in addition to the oil China already imports from Saudi Arabia, which reached about 22.18 million tons in 2005. It has not been disclosed how much oil would be stored in this emergency supply facility. Hu will go on to Morocco, Nigeria and Kenya.

China clinches oil exploration pacts with Kenya

China inked oil exploration deals with Kenya as visiting President Hu Jintao continued his African quest to quench China's large demand for energy to fuel its booming economy. The China National Offshore Oil Corporation (CNOOC) said the agreements covered production-sharing contracts for six blocks off Kenya's Indian Ocean coast covering 115,343 square kilometres. If Kenya's potential Indian Ocean reserves are proven by CNOOC, they would augment the East African oil the country is already importing from Sudan. In addition to the oil agreement, the two sides also signed several other cooperation deals, and China gave Kenya grants of US$8.7 million. But Kenyan Energy Minister Henry Obwocha said the deals allowed China free access to explore the blocks, with payments to be made only if reserves are discovered.

China Mobile looks overseas

A US$4 billion bid was tabled by China Mobile for Millicom International, a mobile phone company that operates in emerging markets. The purchase of the NASDAQ-listed company, which is controlled by Swedish media group Kinnevik, would represent the first overseas M&A activity by a Chinese state-owned telecom operator. It has around 10 million subscribers in 16 countries in Latin America, Africa and Asia. However, China Mobile is likely to face competition from up to six other potential buyers, all of whom have been carrying out due diligence on Millicom since it was put up for sale in January. The bid is in keeping with the Chinese government's "Go Global" policy, intended to turn domestic companies into multinationals. This has taken a turn towards emerging markets as executives see better chance of success there than in developed countries.

China to lead Japan on ore prices

Japan's leading steelmakers are waiting for China, the world's leading importer of iron ore, to set a benchmark price before negotiating raw material contracts with Brazilian and Australian suppliers. The unprecedented move comes after Nippon Steel, Asia's leading steelmaker, agreed a 71.5 percent price increase for iron ore from Brazil's CVRD last year and reflects China's new clout as the world's biggest buyer of raw materials. Melinda Moore, chief representative in China for trade journal Steel Business Briefing said the Chinese think they should lead negotiations in part because the Japanese agreed to such a big price rise last year. Chinese authorities have warned steel mills not to sign separate agreements with iron ore miners, saying they will lose their ore import licences if they break ranks with the rest of the industry.

China's copper imports drop

China's first quarter metals trade figures showed signs of firming copper demand, driven by power sector demand for copper cable, despite sharply lower imports compared with the year before. Imports fell to 205,838 tonnes in the first three months of 2006, down 37.3 percent compared with the year before, when a roaring Shanghai property market helped boost imports. But imports are steadily rising each month, from lows at the end of 2005, even as domestic refined copper output rose 26.3 percent in January-March compared with the first quarter of 2005.

Hitachi plans JV with Baosteel

Hitachi Metals reached an agreement with Shanghai Baosteel Group to establish a JV, Bao Steel Hitachi Rolls (Nantong), in Jiangsu province. The Japan-based special steels, electronics-related products and piping equipment manufacturer expects the new JV to focus on the production and sale of cast rolls for hot strip mills. Registered capital will be US$64 million.

Beijing expects steel prices to rise

China's steel product prices will likely rise gradually in the second quarter, recovering from a first-quarter slump. Prices of key steel products plunged 20.9 percent year-on-year in January-to-March, partly due to a glut in the domestic market and a drop in international prices since late last year. The price fall is expected to erode the first-quarter profitability of major domestic steel mills. A rise in input expenditure in the energy-intensive steel industry, such as higher oil prices and railway cargo transportation costs, is expected to push up steel product prices in the April-June period.