Wed, Nov 19, 2014 - Page 13 News List

China Steel to cut prices on oversupply

RAW MATERIALS:With the price of iron ore falling as overoptimism over China’s economic growth caused a glut, steel prices have followed suit, the local maker said

By Camaron Kao  /  Staff reporter

China Steel Corp (中鋼), the nation’s only integrated steelmaker, yesterday cut its domestic prices for next year’s January and February shipments by 1.71 percent on average, or NT$352 per tonne, compared with next month’s shipments as raw material prices keep declining.

China Steel vice president for sales Liu Jih-gang (劉季剛) said by telephone yesterday that the price of iron ore, the main raw material for making steel, has dropped to US$75 per tonne, hitting its lowest level since the global financial crisis, according to Platts.

The price was also lower than the US$83 per tonne quoted by China Steel for December shipments, the company said.

Liu attributed the price decline to oversupply, which was partly caused by overoptimism about economic growth in China. Liu said it is a global trend.

Steel prices in Southeast Asia dropped by US$5 to US$10 per tonne recently, while steel prices in Europe are also on the decline, Liu said. Even in the US, steel companies have been unable to raise prices amid the economic recovery, he added.

Major steel companies in China — including Baosteel Group Corp (寶鋼), Anshan Iron and Steel Group Corp (鞍鋼) and Wuhan Iron and Steel Corp (武漢鋼鐵) — have either reduced their prices for December shipments or raised them slightly, Liu said.

Liu said the company does not expect the price of iron ore to decline further, while steel prices in China will gradually bottom out.

“As steel companies worldwide are generally adjusting prices downward, China Steel cannot buck the trend,” Liu said, adding that its downstream companies are facing severe competition from their peers abroad, which have access to cheap steel.

China Steel decided to cut its prices for steel plates by NT$604 (US$19.65) per tonne and its steel bars and rods by NT$317 per tonne, the firm said.

The price of cold-rolled sheets and coils, which are used mainly in the automobile industry, is to drop by NT$492 per tonne, while the price of benchmark hot-rolled sheets and coils is to decline by NT$307 per tonne, the company said.

The price of electrical sheets, which are used to manufacture home appliances, is to decline by NT$78 per tonne, while the price of hot-dipped, zinc-galvanized sheets is to drop by NT$383 per tonne, it said.

However, the company is keeping the price of electro-galvanized sheets unchanged as market sentiment for the product is relatively positive, it said.

Liu said China Steel expects its shipments in the next quarter to be 3.12 million tonnes, similar to this quarter.

Commenting on the free-trade agreement between China and South Korea, Liu said it is too early to estimate its impact as the pact is not expected to be finalized until the second or third quarter next year.

Sales abroad account for about 35 percent of China Steel’s revenue, while sales in China make up less than 15 percent, Liu said.

The company sells between 800,000 tonnes and 900,000 tonnes of steel in China a year, while it sold 9.48 million tonnes of steel last year on a non-consolidated basis, Liu said.

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