BAOSHAN Iron and Steel Co, China's largest listed steel maker, yesterday said it will maintain prices for most products for June after slashing them this month.

The steel mill took this action to deal with raw material cost inflation, and the move also reflected a recent rebound in cash market steel prices although demand was expected to be sluggish in the future.

Baosteel, which supplies half of China's market for auto steel, had cut May prices after the March 11 earthquake in Japan affected demand from its auto clients. May's cut was the first reduction in nine months.

The Shanghai-based mill has reported a 22 percent drop in first-quarter earnings because of higher costs for iron ore and coking coal as well as weaker demand.

Analysts said earnings will remain weak in the current quarter given a 25 percent quarterly gain in iron ore contract prices, a slowdown in downstream demand and higher steel production.

Meanwhile, the Ministry of Industry and Information Technology yesterday said China aims to eliminate 26.27 million tons of obsolete steel production capacity this year.

CITIC Securities estimated more than 40 million tons could be trimmed this year. Steel capacity in China stood at 768 million tons at the end of 2010.