Thu, Jul 14, 2011 - Page 12 News List

China Steel slashes domestic steel prices

By Kevin Chen  /  Staff Reporter

China Steel Corp (CSC, 中鋼), the nation’s biggest steelmaker, yesterday said it would cut September domestic steel contract prices by an average of NT$422 (US$14.60), or 1.69 percent, amid softening demand.

This would be the company’s second consecutive cut after it announced on May 26 that it would lower prices by an average of 4.19 percent for deliveries this month and next month. However, the 1.69 percent cut was lower than market expectations.

“The move is expected to stimulate the domestic market and help downstream customers maintain their global competitiveness, even though CSC’s raw material costs remain high in the third quarter,” the Siaogang District (小港), Greater Kaohsiung-based company said in an e-mailed statement.

CSC offers domestic customers “retroactive rebates” on previous-period purchases if the company announces that it will cut prices for the succeeding period. In other words, its domestic customers will now receive discounts on this month’s and next month’s purchases.

Under the latest price adjustments, CSC said prices for benchmark hot-rolled sheets and coils would fall by NT$190 per tonne, or 0.76 percent, for September shipments. That adjustment was lower than Citigroup’s estimate last week of a drop of between 3 percent and 5 percent.

Prices for cold-rolled sheets and coils, which are used mainly in the automotive industry, will drop by NT$870 per tonne, while those for electro-galvanized sheets and electrical sheets will be cut by NT$1,000 and NT$1,208 per tonne respectively.

The company also lowered prices for steel plates used in construction by an average of NT$1,381 per tonne, but prices for steel bars and rods as well as those for hot-dipped, zinc-galvanized sheets will remain unchanged, the statement said.

Steel prices in the international market have softened recently because of stagnant demand against slowing global economic growth, CSC said, adding that the IMF has lately trimmed its global economic growth forecast to 4.3 percent for this year from the earlier estimate of 4.4 percent.

Adding more downward pressure to steel prices were the expanded exports from steel mills in Japan, South Korea and China caused by sluggish sales in their home markets, CSC said.

However, after steel prices dropped below production costs, steel mills in the US and Europe began to reduce production and raise prices for steel bars, CSC said.

As Japanese mills have also raised prices for April-September contracts for automobile and consumer electronics makers by US$160 to US$180 per tonne, and demand in China is expected to increase by 30 million tonnes to support the automaking and construction industries by the end of November, CSC expects the international steel market will see a strong fourth quarter driven by restocking demand.

"[CSC] expects international steel prices to emerge from the current phase of consolidation and grow stronger beginning in September," it said.

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