May 27, 2011

Source From Taipei Times

http://www.taipeitimes.com/News/biz/archives/2011/05/27/2003504229

China Steel Corp (CSC, 中鋼) yesterday announced that it would lower domestic steel prices for July and August deliveries by 4.19 percent per tonne from next month’s levels to reflect weak demand by its downstream customers, but said it expected prices to stabilize next quarter.

The nation’s biggest steelmaker said it would cut the domestic prices of five major products by an average of NT$1,099 (US$37.97) a tonne, with hot-rolled coil, a benchmark product, down by NT$1,754 per tonne, according to an e-mailed statement from the company.

Yesterday’s announcement was China Steel’s first price cut this year. Last month, the Kaohsiung-based firm announced it would maintain unchanged prices on most of its steel products for delivery next month, after raising prices by an average of 12.1 percent for deliveries last month and this month and an increase of 2.9 percent on March shipments.

“Global economic uncertainties, the impact of Japan’s earthquake [in March] and increased global steel production in the first quarter have pushed down steel prices recently,” CSC said in the statement.

The company said market demand remained unclear because many customers had become more conservative and decided to maintain extremely low inventories because of uncertainties in global political and economic conditions.

However, “global steel prices have shown signs of bottoming out after some steelmakers began cutting production to reflect rising raw material costs in the second quarter,” CSC said.

To match the recent surge in raw material costs, Chinese steel mills led by Baoshan Iron and Steel Co (寶鋼) announced earlier this month that they would raise prices slightly for next month’s shipments. In addition, US steelmakers have been considering increasing export prices by between US$22 and US$55 a tonne, while their Japanese peers are also planning to raise export prices by US$150 a tonne for next month’s deliveries, according to CSC.

“Market demand in the third quarter will certainly be stronger than that in the second quarter,” thanks to re-stocking by customers on expectations of Japan’s post-quake reconstruction and automakers’ resumed production, CSC said.

Even so, the company said it needed to take into consideration downstream customers’ global competitiveness, which has been under pressure because of the New Taiwan dollar’s recent appreciation against the US dollar.

Under the latest pricing adjustments, CSC will not change the prices for steel plates, steel bars and rods, but will cut the price of cold-rolled sheets and coils, which are used in the automotive industry, by NT$1,419 per tonne.

It will also cut the cost of electro-galvanized sheets by NT$1,500, lower electrical sheets by NT$2,600 and drop another NT$1,613 off the price of hot-dipped zinc-galvanized sheets.

CSC shares fell 0.44 percent to close at NT$34.25 on the Taiwan Stock Exchange before the price cuts were announced.

The shares have risen 2.24 percent since the beginning of the year, outperforming a decline of 2.05 percent on the benchmark TAIEX.