Fri, Nov 23, 2007 - Page 12 News List

China Steel announces Q1 hikes

PASSING THE BUCK The company, which commands more than 50 percent of the domestic market for most steel products, has been hammered by increasing costs

By Kevin Chen  /  STAFF REPORTER

China Steel Corp (中鋼), the nation's largest and sole integrated steelmaker, will increase its domestic steel prices by 5.42 percent on average for next quarter to reflect higher raw material costs and shipping fees, the company said yesterday.

The Kaohsiung-based company announced the price hike amid supply concerns after iron ore inventories in the US dropped to their lowest level in two years, while demand in Europe and Japan remains high.

Steelmakers in the US are likely to raise prices by between US$30 and US$40 per tonne in the first quarter, while elsewhere steel mills in Europe may in the meantime hike prices by between 30 euros (US$44.4) and 40 euros per tonne and by as much as US$50 per tonne in Japan, China Steel said.

On Tuesday, Baoshan Iron & Steel Co (寶鋼), China's biggest steelmaker, announced that it will increase hot-rolled steel prices by as much as 7 percent in the first quarter of next year.

Shares of China Steel were little changed yesterday before the price hike announcement, which had been expected. The stock dropped 0.72 percent to close at NT$41.2 on the Taiwan Stock Exchange, but has risen by 18.22 percent since the beginning of the year.

China Steel said the 5.42 percent increase quarter-on-quarter does not fully reflect the rise in raw material and shipping costs. The company said it wanted to allow its customers to adjust to the new prices without hurting their competitiveness.

"By saying that, it could also imply that China Steel will continue raising its prices in subsequent quarters next year," Allison Lu (呂雅菁), an analyst who tracks steel stocks at the Capital Securities Corp (群益證券), said yesterday.

Lu said she estimates that global prices of coal and iron ore will increase by a further 30 percent for next year, which will translate into a 10 percent increase in refinery costs for steelmakers such as China Steel.

"The 5.42 percent hike is relatively small compared to the potential increase in refinery costs. Consequently, China Steel remains under pressure to increase its prices in the second quarter and quarters ahead," Lu said.

Chung Lo-min (鍾樂民), spokesman and an executive vice president of China Steel, said the latest price hikes would help narrow the gap between international and domestic steel prices.

He declined to comment on whether the company will continue to increase domestic prices in the second quarter.

"Further hikes will depend on how demand and raw material costs take shape in the first quarter," Chung said by telephone.

Even in the worst-case scenario, with raw materials and shipping costs continuing to soar, he said the company would only increase prices by a bigger range in the second half of next year.

China Steel price hikes are watched closely by industry as the company commands more than 50 percent of the domestic market for most steel products. Last year, the company produced and sold about 10.32 million tonnes of steel products.

In yesterday's statement, China Steel said it would increase prices of steel plates by NT$2,080 per tonne and those of bar/wire rod products by NT$1,800 per tonne.

Hot-rolled steel prices will increase by NT$700 per tonne, cold-rolled steel by NT$630 per tonne, electrical coil wires by NT$1,100 per tonne and hot-dip zinc-galvanized sheets by NT$630 per tonne.

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