Sat, Aug 18, 2012 - Page 14 News List

China Steel likely to cut prices again, Grand Cathay says

By Kevin Chen  /  Staff reporter

China Steel Corp (中鋼), the nation’s largest integrated steelmaker, could see increased earnings downside risk this year, as the company is likely to cut domestic prices again next week, Grand Cathay Investment Services Corp (大華投顧) said yesterday.

Grand Cathay said in a note that it expected China Steel to announce on Thursday domestic price cuts for its October and November shipments. The company last month lowered prices for next month’s contracts by an average of NT$1,139 per tonne, or 5.01 percent, from July and August levels.

China Steel offers customers “retroactive rebates” on previous-period purchases if it cuts prices for the succeeding period. Grand Cathay said the upcoming price cut therefore could have an impact on China Steel’s bottom line this year.

It also said China Steel’s plan to cut its utilization rate next month suggested the outlook for the market remained weak in the fourth quarter, although the October-to-December quarter is traditionally a peak season for steelmakers.

The Chinese-language Commercial Times reported yesterday that China Steel is planning to lower its utilization rate by 15 percent next month and delay the No. 2 furnace operation at its Dragon Steel Corp (中龍) unit until February next year because of dwindling domestic demand and weaker global steel prices.

Grand Cathay adjusted downward its earnings per share forecast for China Steel to NT$0.4 to NT$0.5 this year, from NT$0.53 estimated earlier. The company’s EPS were NT$1.4 for last year.

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