Fri, Aug 24, 2012 - Page 14 News List

China Steel set to cut domestic prices by 5 percent

THAT’S A STEEL:Citing slow global economic growth and weak customer demand as key issues, the steelmaker hopes a price cut will increase downstream firms’competitiveness

By Kevin Chen  /  Staff reporter

China Steel Corp (CSC, 中鋼), the nation’s only integrated steelmaker, yesterday said it would lower its domestic steel prices for October and November contracts by an average of NT$1,142 (US$38.11) per tonne, or 5.11 percent, following a 5.01 percent cut for next month’s shipments.

The latest price adjustment is the company’s second-largest price decline this year, compared with the 7.08 percent cut for January and February deliveries, as demand is weak and the outlook for the sector remains bearish in the fourth quarter.

Fubon Securities Investment Services Co (富邦投顧) analyst Kevin Lin (林茂揚) said the 5.11 percent cut met his expectation of an average decline of US$30 to US$40 per tonne.

“China Steel’s continual price cuts and its plan to cut its utilization rate next month would mean a limited improvement in its earnings outlook for the fourth quarter, although the October-to-December quarter is traditionally a peak season for the steelmaking sector,” Lin said in a note yesterday.

In the first seven months of this year, China Steel posted NT$2.63 billion in pretax profit, down 86.4 percent year-on-year, with pretax earnings per share of NT$0.17.

Grand Cathay Investment Services Corp (大華投顧) yesterday adjusted downward its profit forecast for China Steel for this year, expecting net income of NT$5.48 billion, or earnings per share of NT$0.36, down 71.9 percent year-on-year, on revenue of NT$210.2 billion, down 12.6 percent from last year, according to a separate note.

Like Grand Cathay, Fubon maintained a “neutral” rating on China Steel shares, with a target price of NT$26.6. The stock closed at NT$26.35 yesterday in Taipei trading, down 0.57 percent from Wednesday.

Global steel prices have been hovering at low levels so far this quarter because of weak demand amid slowing economic growth around the world, China Steel said yesterday.

Against this backdrop, the company has to cut prices to boost downstream customers’ confidence and help maintain their global competitiveness, it added.

“Global steel prices are expected to bottom out soon once end users start restocking,” the company said in an e-mailed statement.

Under the latest price adjustments, China Steel said prices for benchmark hot-rolled sheets and coils would fall by NT$806 per tonne for October and November shipments.

Lin said China Steel’s NT$806 price cut per tonne on hot-rolled products was lower than the market had expected and that would still pose cost pressure for its downstream customers.

Prices for cold-rolled sheets and coils, which are used typically in the automotive industry, are to drop by NT$959 per tonne, China Steel said, while those for electro-galvanized sheets and electrical sheets will be cut by NT$800 and NT$1,050 per tonne respectively.

The company also lowered prices for steel plates used in construction by an average of NT$1,157 per tonne, cut prices for steel bars and rods by an average of NT$1,800 per tonne and reduced those for hot-dipped, zinc-galvanized sheets by NT$1,216 per tonne.

This story has been updated since it was first published.

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