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China Steel Corp raises prices

China Steel Corp (中鋼), the nation's largest and only integrated steelmaker, yesterday announced it would raise domestic steel prices by an average of 19 percent for the second quarter to reflect rising raw material costs and shipping fees.

The hikes of NT$4,000 (US$130) on average per tonne would also help narrow the gap between international and domestic steel prices, the Kaohsiung-based company said in a statement. But the 19 percent increase quarter-on-quarter did not fully reflect the rise in raw material costs, which have increased by nearly 40 percent recently, it said.

Steel plate will cost NT$4,500 more per tonne, while bar/wire rod product prices will increase by NT$4,550 per tonne, the company said.

Hot-rolled or cold rolled steel will cost an additional NT$4,000 per tonne, electro-galvanized coil wires will be NT$3,700 more per tonne, electrical coil wires are going up by NT$4,500 per tonne and hot-dip zinc-galvanized sheets by NT$3,800 per tonne, it said.

"China Steel has not fully passed on the increases in raw material prices to domestic customers as it needs to heed the government's inflationary concerns," Allison Lu (呂雅菁), an analyst who tracks steel stocks at the Capital Securities Corp (群益證券), said by telephone yesterday.

The company said it wanted to allow its downstream customers to adjust to the new prices without hurting their competitiveness.

"The 19 percent hike should be the largest quarterly hike this year, but it is still relatively small compared with increases by China Steel's foreign rivals," Lu said. "The company remains under pressure to increase its prices in subsequent quarters, but further hikes will depend on how demand and raw material costs take shape."

Capital Securities hold a "buy" recommendation on China Steel, with a 12-month target price of NT$52.

Shares of China Steel rose 1.16 percent yesterday to close at NT$47.8 before the price hike announcement. The stock has risen by 9.89 percent since the beginning of the year.

The price hike announcement comes amid supply concerns after US iron ore prices surged, with prices of hot-rolled products reaching US$805 per tonne FOB (free on board) or export prices, China Steel said.

Steel prices also soared to record levels in Europe, where export prices for hot-roll items have recently increased to as much as US$900 per tonne, it said.

European steelmakers have announced price hikes of between US$150 and US$200 per tonne for next month, and steel mills in Asia are also raising their prices.

On Feb. 25, Baoshan Iron & Steel Co (寶鋼), China's biggest steelmaker, said it would increase hot-rolled steel prices by as much as 20 percent in the second quarter.

Nippon Steel Corp of Japan announced on Feb. 22 that it would hike prices by US$191 for domestic customers and by between US$200 and US$250 for exports. Posco of South Korea plans to raise domestic prices in the second quarter following an increase of 11.5 percent in the first, China Steel said in its statement.
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