China Steel Corp (中鋼), the nation’s biggest steelmaker, announced yesterday it would cut domestic steel prices for January and February by an average NT$280 (US$8.68), or 1.33 percent, from next month’s level.
Last month the Kaohsiung-based company lowered its prices for next month by an average of 4.45 percent. However, both the company and analysts said yesterday that prices are bound to rise again in the second quarter of next year because of higher prices of raw materials and strong market demand.
China Steel’s latest price cut stands in stark contrast to the recent actions of its Asian peers, as leading Chinese steel mills such as Baoshan Iron & Steel Co (寶鋼), Anshan Iron & Steel Group (鞍鋼) and Wuhan Iron & Steel Co (武鋼) have hiked domestic and export prices for next month, while Japanese firms have discussed raising export prices of hot-rolled and cold-rolled steel products by US$30 per tonne during the first quarter of next year.
“Despite the momentum of rising prices in the Asian region, the company decided to cut domestic prices because of weaker than expected demand from downstream customers,” China Steel said in a statement.
The price adjustment was also due to anticipated slower demand in February, during the Lunar New Year holiday period, the company said.
“The price cut was in line with our expectations, especially when the company decided to maintain its benchmark hot-rolled sheet and coil prices, as domestic demand remains weak,” Angela Chuang (莊慧君), an analyst at Capital Securities Corp (群益證券), said by telephone.
“But as steel prices seem to have stopped declining in China and the overall industry appears to be bottoming out globally, coupled with a trend of rising raw material prices next year, there is a good chance China Steel will raise prices in March,” Chuang said.
The company may be able to raise prices in the second quarter at the earliest, public affairs manager Huang I-chung (黃一中) said by telephone on behalf of executive vice president Chung Le-min (鍾樂民).
Huang said steel prices would gain support next year, as the world’s three major iron ore miners — BHP Billiton Ltd, Rio Tinto Plc and Vale SA — are likely to increase iron ore prices by 30 percent to 35 percent next year.
BHP, Rio Tinto and Vale account for 75 percent of all global iron ore supply.
In addition, the shutting of China Steel’s No. 1 blast furnace early next year for annual maintenance will likely affect overall production capacity, Huang said.
China Steel will maintain its bar and wire rod prices as well as those for hot-rolled steel and electro-galvanized sheets for January and February.
It is also lowering the price of plates used in construction by an average NT$1,384 a tonne to help its domestic customers compete with Japanese and South Korean rivals.
It will also cut cold-rolled sheet and coils by NT$129 a tonne and reduce prices for electrical sheets by NT$800 and hot-dipped, zinc-galvanized sheets by NT$1,157 per tonne each.
Since the company offers domestic customers “retroactive rebates” on previous period purchases if it announces a price cut for the succeeding period, it would mean customers will receive discounts on next month’s purchases.
The price cut announcement came after the local stock market closed.
Shares of China Steel fell 0.65 percent to NT$30.80, compared with the benchmark TAIEX’s decline of 0.22 percent.
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