China Steel Corp (中鋼), the nation’s biggest steelmaker, yesterday said it would cut domestic steel prices for September delivery by an average of NT$1,020 (US$31.58), or 4 percent, amid softening demand. The cuts end four consecutive price hikes since March.
The Kaohsiung-based company said it would offer domestic customers “retroactive rebates,” meaning the discount would cover purchases made in July and August.
The company’s latest price cuts were in line with JPMorgan Securities analyst Nick Lai’s (賴以哲) forecast on Monday of a drop of between 4 and 5 percent, a move that is expected to provide incentives to customers to fulfill orders and enhance their price competitiveness.
“Worries that Europe’s debt woes may push it into a double dip recession have placed steel prices under correction pressure in the US and Europe, while prices in China have fallen continuously due to China’s adjustment of macroeconomic policies and persistent oversupply in the steel industry,” China Steel said in a statement.
Hours after China Steel’s price cuts announcement, Baoshan Iron & Steel Co (寶鋼), China’s largest steelmaker, said it was cutting prices for some of its hot-rolled and cold-rolled products by 300 yuan (US$44) per tonne for August delivery, according to a company statement posted on the Chinese-language Web site Bsteel.com.cn (東方鋼鐵在線).
In China Steel’s statement, the company said some of its downstream customers had recently seen lower orders for cold-rolled sheets and coils as well as hot-dipped, zinc-galvanized sheets because of low-priced competition from Chinese steel exports following Beijing’s efforts to rein in soaring housing prices.
JPMorgan analyst Nathan Zibilich forecast that steel prices in China could see a further 10 percent decline in the remaining months of the year due to high inventory and poor demand.
Meanwhile, Citigroup Global Markets analysts Peter Kurz and Timothy Chen on Monday forecast that Chinese steel production would continue to fall over the next three months to help stabilize prices.
Under the latest adjustments, China Steel said prices for benchmark hot-rolled sheets and coils would fall by NT$1,800 per tonne, or 7.06 percent, for September shipment. That adjustment was lower than Citigroup’s estimate of a fall of US$60 (NT$1,930) per tonne.
Prices for cold-rolled sheets and coils will drop by NT$1,200 per tonne, while those for electro-galvanized sheets and hot-dipped, zinc-galvanized sheets will be cut by NT$1,200 and NT$2,528 per tonne respectively.
Prices for steel plates, steel bars, wire rods and electrical sheets will remain unchanged, according to the statement.
In related news, China Steel said a fire at its No. 1 furnace in Kaohsiung, which broke out at 12:45pm yesterday, was put out in 30 minutes. No one was injured, it said.
The company said it would take two days to resume production. It did not provide an estimate of potential losses.
Shares of China Steel fell 0.33 percent to NT$30.35 yesterday before the announcement of the price cuts, compared with a 0.55 percent decline in the TAIEX.
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