Sat, Apr 18, 2015 - Page 13 News List

China Steel Corp cuts prices due to weak demand

PRICE WAR?The firm said it had been severely impacted by Chinese and South Korean steelmakers lowering the prices of exports to below Taiwan’s market prices

By Lisa Wang  /  Staff reporter

China Steel Corp (CSC, 中鋼) yesterday announced a deeper-than-expected price cut of 7.4 percent on average for its products to be shipped to local customers in June, as sluggish demand is adding pressure on the profits of the nation’s biggest steelmaker this quarter.

The latest price cuts brought the total price reduction on steel to be shipped in the current quarter to 12.6 percent, or NT$2,293 per tonne, sequentially, as a staggering global economy and oversupply curtailed demand.

“Price decline in other commodities, primarily coal and iron ore, have added to already gloomy market sentiment. People have become more conservative and prefer to sit on the sidelines,” CSC said in the statement.

In the US, some steelmakers stepped up plant maintenance efforts to weather the slump, it said.

To digest excessive capacity and output, Chinese and South Korean steelmakers recently accelerated exports overseas at prices below market prices in Taiwan, which has severely affected the company, CSC said.

Sluggish demand pushed some global steelmakers to slash prices by as much as US$100 per tonne in order to gain orders, CSC vice president Liu Jih-gang (劉季剛) said by telephone.

“Most steelmakers, including those from China, are struggling to make profits,” Liu said.

Revenue generated by CSC’s Vietnam factory also fell short of the company’s expectations because of weak demand there, Liu said.

The price reduction is almost certain to reduce CSC’s revenue this quarter, but it is hard to say how big the impact is set to be on its bottom line, Liu said. Manufacturing costs and non-core business performance have to be considered as well, he said.

At the moment, there is no imminent need for CSC to increase regular maintenance from the current eight hours per month, nor to shut down facilities, Liu said. Market conditions are still better than those during the financial crisis of 2008, during which CSC cut production by 15 percent, he said.

Overall, the business outlook for next quarter is unclear, Liu said.

“We have not seen any [upturn] signs yet,” Liu said.

Based on the company’s latest price adjustments, the price of cold-rolled sheets and coils, which are used mainly in the automobile industry, is to plunge by NT$1,499 per tonne, while that of benchmark hot-rolled sheets and coils is to drop by NT$1,500 per tonne, China Steel said in a statement.

The price for steel plates is to decline by NT$1,045 per tonne, the statement said.

The price of electrical sheets, which are used to manufacture home appliances, is to decline by NT$700 per tonne and hot-dipped zinc-galvanized sheets are to be NT$1,200 less per tonne, while the price of electro-galvanized sheets is to fall by NT$1,090, it said.

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