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Government probes steel hoarding

"China's huge demands for steel prompted a global shortage of steel and price rises."

Thomas Lin, president of Chun Yuan Steel Industry Co

The government is investigating suggestions by steel-using industries that steel distributors had formed a cartel to manipulate supplies and prices, an official at the Fair Trade Commission said yesterday.

"In light of the skyrocketing steel price recently, the commission decided to conduct an investigation of the industry and any illegal behavior, according to Article 26 of Fair Trade Law," commission Chairman Hwang Tzong-leh (黃宗樂) said yesterday.

Hwang made the remarks at a meeting with 30 steel wholesalers, during which he said the commission began earlier this week to investigate about 20 companies that were suspected of hoarding steel to restrict its supply and artificially raise prices.

The commission would impose fines of up to NT$25 million on companies found to be in a cartel, Hwang said.

A group of industries that depend on steel supplies published a petition in several Chinese-language newspapers yesterday, pleading for a government investigation into price manipulation by wholesalers.

In the advert, the federation said wholesalers supplied steel plates at NT$24 per kilogram, while a reasonable price should be NT$18.5. They said the wholesalers bought the plates for NT$15 per kilogram from China Steel Corp (中鋼), the nation's largest steelmaker.

Liang Yi-yuan (梁宜源), a section chief at the Industrial Development Bureau under the Ministry of Economic Affairs, said that it was unreasonable for downstream companies to pay higher prices as the nation's steelmakers were operating at only 80 percent capacity and state-run China Steel was still charging prices below international levels.

Wholesalers said they were also suffering from shortages, reducing their reserves, as China Steel had set a quota for steel that it supplies directly to industries.

"China's huge demands for steel prompted a global shortage of steel and price rises," said Thomas Lin (林清波), president of Chun Yuan Steel Industry Co (春源鋼鐵), a steel supplier to local automakers.

Downstream industries, he added, had promised to fulfill orders without securing enough steel in advance and were now blaming wholesalers.

The shortage of steel resulted from soaring demand in China, which is developing its infrastructure to host the 2008 Olympic Games and the 2010 World Exposition, said Shieh Tung-po (謝東波), general manager of marketing at China Steel.

China's needs for steel increased by 28 percent, or 60 million tonnes, last year from the previous year and now equals Japan's annual demand, he said.

Between last June and February this year, the price of raw materials including iron sand and scrap steel rose by between 39 percent and 82 percent. Major steel products such as steel panels and steel bars had a markup of between 7 percent and 47 percent over the same period, according to figures provided by Industrial Development Bureau.

To counter the problem, the government announced earlier this week that exporters need to apply for a permit for five categories of steel products, including scrap steel, steel bar and steel tubes, for the next six months.
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