As a signal that the government’s stimulus spending is improving demand from automakers and builders. It is reported that Wuhan Iron & Steel Co., China’s third-biggest steelmaker, raised prices by as much as 12 percent for August delivery, signaling.

Cold-rolled prices were increased by 480 yuan ($70) a metric ton, and hot-rolled coil by 240 yuan, Board Secretary Wan Yi said today in an interview. This would be the third month the Hubei province-based mill has raised prices for cold-rolled products, Umetal Research Institute said.

Benchmark Chinese steel prices have gained 15 percent since April 1 as Wuhan Steel, Baoshan Iron & Steel Co. and Maanshan Iron & Steel Co. took advantage of recovering demand. The improvement may make it harder for Chinese mills to ask Rio Tinto Group to cut iron ore prices by more than 33 percent.

“Economic statistics show steel demand is gradually picking up,” Hu Yanping, a Beijing-based analyst with Umetal, said by phone. “China may find it difficult to achieve its demand in contract iron ore price talks.”

Wuhan Steel rose 2.7 percent to 8.82 yuan in Shanghai trading, compared with a 1.1 percent decline in the benchmark Shanghai Composite Index. The stock is up 85 percent this year.

The price increases translate into a 12 percent hike to 4,450 yuan, excluding tax, for cold-rolled products, Umetal said. Hot-rolled prices would increase by 6.9 percent to 3,740 yuan, it said. Wuhan Steel’s Wan didn’t give details.

Public WorksSpending on public works and infrastructure projects by countries including China is lifting steel demand globally.

Chinese steelmakers are locked in talks to settle annual contract iron ore prices with London-based Rio, the world’s second-largest supplier of the steelmaking ingredient. The mills may consider trimming their price cut demands of as much as 45 percent, it is said that July 2. Rio agreed to a 33 percent cut with Japanese and Korean customers.

In Europe and the United States, steel order books have improved over the past month, prompting producers to restart some idled capacity, but full recovery is some months away because real demand remains depressed.

Behind the uptick in orders is the fact that destocking in the United States has finished and in Europe is coming to an end, which analysts say is the reason for higher steel prices and resumption of output.

ArcelorMittal, the world’s largest steelmaker, last week said it was planning to restart some of its idled capacity in the United States and Brazil. US Steel Corp also signaled that it was about to bring back some capacity.

However, analysts and producers say the light at the end of the tunnel is still dim and although the worst seems to be over, the road to recovery is set to be rocky.

“Green shoots seems to be the phrase but it’s hard to believe that we’re really seeing a sustainable uptake in demand,” said John Lichtenstein, global leader of steel at consultancy firm Accenture.

“The risk is that increased production on the part of multiple producers will overwhelm the real demand increase, thereby putting renewed pressure on prices,” he said.

Germany’s top producer Thyssenkrupp said this week that it raised its prices from July 1 while industry sources said Europe’s second biggest steelmaker Corus was about to increase its prices too.

Global steel prices have tumbled more than 70 percent in some regions since hitting a peak in mid-2008, as a global economic downturn depressed demand in key consuming industries such as construction and automotives.

Currently domestic hot-rolled coil (HRC) prices in Europe are at about 375 euros per ton, with another 30 euros increase expected. It was 360 euros a month ago.

In long products, billet prices in the Black Sea region have risen to around $410-415 a ton, compared with around $350 a tonne about a month ago.

Slow, prolonged recoveryThe industry expects a slow, prolonged recovery, with production not reaching the levels seen in peak years, like 2007, before 2011 or even beyond.

“Based on what’s happened up to now, we should be at or near bottom, but we’re going to be there for awhile,” said Daniel DiMicco, CEO of US steelmaker Nucor Corp, adding that he believes the recovery will take at least 3 years.

In Europe, industry body Eurofer sees the market bottoming although it expects weak demand to keep consumption depressed and a bounce would only come by the last quarter.

As the industry struggles to regroup after one of its biggest shake-ups, one major problem looms – overcapacity.

Andre Gerdau Johannpeter, chief executive of Brazil’s largest steelmaker Gerdau, said that There was 1.7 billion tonnes of capacity out there and the production forecast was 1.1 billion tons.

It is reported that the annual iron ore price talks between Chinese steel makers and the world’s biggest iron ore miners will continue past the deadline (tuesday).

China is still in talks with major iron ore firms for the annual supply deal, Chen Xianwen, director of the market operations department of the China Iron and Steel Association (CISA), told Xinhua Tuesday.

The CISA heads the talks on behalf of China’s steel-makers.

“We are officially in discussions still,” said Gervase Greene, spokesman of Rio Tinto, in an email to Xinhua late Monday.

Chen said that the CISA still insisted that the iron ore prices should fall back to 2007 levels, which meant a price cut of more than 40 percent in the annual contracts of iron ore.

The CISA said in a statement on May 31 that China’s steel companies would refuse to accept the 33-percent price cut reached between Rio Tinto and Japan’s Nippon Steel Corp.

The price cut would lead to overall losses for Chinese steel companies, the CISA said in the statement.

The Chinese side was working to seek a cut of more than 40 percent.

Both Chen and Greene refused to comment further on how the talks were progressing.

If the CISA failed to reach a supply agreement with any of the three biggest mining companies — Vale of Brazil, Rio Tinto and BHP Billiton — Chinese steel makers may have to turn to the spot market for supplies.

Spot iron ore prices raised the highest in four months and above the annual benchmark level agreed between the three miners and big steel makers elsewhere in Asia.

It is reported from Sichuan Daily that Xilian Steel Logistics Port broke ground in Jinniu High-Tech Industrial Park of Chengdu capital of Sichuan province.

The report said that it was funded a total of CNY 1 billion and will become the provincial biggest steel logistics port and one of the largest steel trading bases in West China upon its start of service, expected to contain thousands of enterprises running steel business, handle 6 million tonnes and process 1.5 million tonnes of steel products a year.

Steel logistics and trading business of Chengdu traditionally used to concentrate in the north area, poor in layout and function. The newly started-up port will be a multi-functional modern steel logistics port integrating economic, logistics, information communication and capital flow.

The Port teams up with Huaxia Bank Chengdu Branch to kick off a kind of individual financing service Mutual Benefit Financing Chain through the vehicle of chattel mortgage, realizing E-payment, E-trading and E-logistics to its end. Meanwhile, a bonding company with registered capital of 100 yuan will be introduced to help solve financial problems those small and medium companies would encounter.

According to the statistics collected from 89 mid- and large-sized steel makers conducted by the China Iron and Steel Association, China steel manufacturers made a profit of 1.26 billion yuan during May.

Another tabulated set of statistics on 71 mid- and large-sized steel plants reported that a 1.03 billion yuan profit was made in May. Among them, 25 plants suffered losses, accounting for 28.1 percent of the total companies, with the losses amounting to 1.81 billion yuan, down 1.28 billion yuan from April.

From January to May, Chinese mid- and large-sized steel plants suffered a total loss of 3.88 billion yuan, starkly below the 86.50 billion yuan profit achieved during the same period of last year.

In October 2008, it is reported from China’s steel industry that its first loss of 5.8 billion yuan in six years. The losses mounted to 47.6 billion yuan, leading to a 41-percent decline in 2008’s annual profits, during the fourth quarter of last year.