China Steel Corp (CSC, 中鋼), the nation’s biggest steelmaker, yesterday reported its first monthly operating losses in about three-and-half years, as oversupply drove down prices.
The company, which is based in Kaohsiung’s Siaogang District (小港), posted operating losses of NT$6 million (US$182,326) for last month, reversing an operating profit of NT$164 million in September.
CSC blamed a global economic slump and overcapacity in China for its weak financial performance. The company’s last reported operating loss was in February 2012, when it posted pre-tax losses of NT$572 million, the company said.
CSC said its pre-tax profits fell 85 percent to NT$109 million last month, compared with NT$725 million in the previous month.
Revenue was little changed at NT$21.13 billion compared with the prior month, while shipments of carbon steel dropped 3.5 percent to 733,423 tonnes from 759,774 tonnes in September, the company said.
Due to weak steel demand and falling steel prices in China, analysts said peak-season demand in the final quarter of the year might only halt the decline in steel prices rather than drive up prices, which would keep revenue and earnings low this quarter for the steel sector.
“As steel prices in China, a market that determines global supply and demand conditions, remain relatively sluggish, CSC and its downstream steel manufacturers in Taiwan are unlikely to raise their product prices during the traditional fourth-quarter peak season,” Capital Securities Corp (群益證券) said in a note.
Last month, CSC decided to keep its prices unchanged for products to be delivered to domestic clients next month, marking the first price stabilization after eight consecutive price cuts since December last year.
However, weak demand has caused a dent in profitability at its core operations. CSC reported a net profit of NT$740 million for last quarter, down by 74 percent from NT$2.85 billion in the second quarter. In the first three quarters of the year, net profit fell 40.78 percent year-on-year to NT$9.12 billion.
Deutsche Bank AG said a poor utilization rate and the weak profitability of its new facilities in Vietnam and India have also eroded CSC’s already thin profit margins, while China’s aggressive steel export targets are to continue to put pressure on CSC in the near term.
In a separate statement released yesterday, CSC said it plans to recruit 522 workers to cope with labor shortages after some employees applied for retirements.
This is the second personnel retirement program launched by the steelmaker after it announced it would hire 300 workers in February.
Shares of CSC fell 1.5 percent to NT$19.1 yesterday, hitting their lowest level in about two months.
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