China Steel Corp (中鋼), the nation’s biggest steelmaker, announced yesterday that it was raising domestic prices on all its steel products for April and May deliveries by an average of NT$612 (US$19.07) per tonne, or 2.9 percent.
The increase was the company’s second hike this year after it increased prices by an average of NT$1,011 per tonne, or 4.92 percent, for next month’s shipments.
The company said in an e-mailed statement that the hike was to reflect the market’s rising demand amid a stable recovery in the global economy. Global demand for steel is expected to increase 9.2 percent to 1.206 billion tonnes this year, China Steel said, citing the World Steel Association’s forecast.
However, the range of the increase was lower than analysts’ estimates, indicating that the Kaohsiung-based company is likely to raise prices for June delivery when it makes the announcement next month.
“It [the 2.9 percent increase] is a mild hike in our view, as China Steel is taking into consideration the possible impact on its middle and downstream customers,” Angela Chuang (莊慧君), an analyst at Capital Securities Corp (群益證券), said yesterday by telephone.
A large price hike is likely to negatively affect the downstream industry’s global competitiveness. The Chinese-language Economic Daily News reported yesterday that four of China Steel’s downstream customers including Yieh Phui Enterprise Co (燁輝) and Kao Hsin Chang Iron & Steel Corp (高興昌) visited the company on Tuesday, citing China Steel sources.
Shares of China Steel fell 1.36 percent to NT$32.75 yesterday before the announcement of the increased prices. The stock has declined 0.76 percent so far this year, compared with an 8.04 percent fall on the benchmark TAIEX.
China Steel said it was raising prices for the benchmark hot-rolled sheet and coil by NT$595 per tonne, or 2.82 percent, for April and May shipments. That was higher than Citigroup’s forecast of a 3.5 percent increase, according to a note from the brokerage issued on Monday.
However, Chuang said the company was making a rush decision to announce the price hike as it has yet to settle second-quarter coking coal and iron ore contract prices with major suppliers.
China Steel said in the statement that it expected new contract prices of coking coal and iron ore to rise more than 40 percent this year from last year.
Chuang said she agreed the contract price increases of iron ore might exceed 40 percent, but expected coal prices to surge by between 50 percent and 80 percent due to recent disruption in coal shipments at Australian ports.
“Nevertheless, the rising raw material costs will give necessary support to steel prices in the remaining months of the first half,” she said.
Re-stocking by customers on concerns of potential supply shortages and more price hikes in the months ahead would also help keep the steel industry’s momentum this year, she added.
Under the latest adjustments, China Steel said it would also raise the price of plates used in construction by an average of NT$804 per tonne, add NT$300 to bar and wire rod prices and NT$793 to cold-rolled sheets and coils, which are used in the automotive industry.
The company also increased prices for electro-galvanized sheets by NT$1,000 per tonne, added NT$1,200 onto electrical sheet prices and slapped another NT$678 on hot-dipped, zinc-galvanized sheets.
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