China Steel raises prices by 17.8% for third quarter

By Kevin Chen  /  STAFF REPORTER

Fri, May 30, 2008 - Page 12

China Steel Corp (中鋼), the nation’s largest and only integrated steelmaker, announced yesterday it would raise domestic steel prices by an average of 17.8 percent for the third quarter, following a 19 percent increase in the second quarter, to reflect rising raw material costs and shipping fees.

The hikes of NT$4,520 (US$148) per tonne on average will also help narrow the gap between international and domestic steel prices, the Kaohsiung-based company said in a statement.

The company said in the statement that the 17.8 percent increase quarter-on-quarter did not fully reflect the rise in raw material costs, adding that the adjusted domestic prices for the majority of its products were still US$100 lower than international levels.

Shares of China Steel fell 0.38 percent yesterday to close at NT$52.1. Investors had factored in the price increases prior to yesterday’s announcement after some foreign steel companies raised prices.

The stock has risen by 19.77 percent since the beginning of the year, outperforming a 2.1 percent rise on the benchmark TAIEX over the same period, Taiwan Stock Exchange tallies showed.

“China Steel’s price hikes are in line with our expectations, as global steel prices are on an upward trend,” analyst Angela Chuang (莊慧君), who tracks steel stocks at Capital Securities Corp (群益證券), said by telephone yesterday.

While the company’s steel products were between NT$7,000 to NT$11,300 per tonne lower than international levels in the second quarter, China Steel may face less pressure to increase its prices in subsequent quarters, the analyst said.

“China Steel is not likely to substantially raise its domestic prices for the fourth quarter as its hikes for the second and third quarters have largely reflected these rises in raw material costs,” Chuang said, referring to a 85 percent rise in iron ore costs and a 200 percent surge in coking coal prices for the period.

Under the company’s price adjustment scheme, steel plate will cost NT$4,310 more per tonne, while bar and wire rod prices will increase by NT$4,830 per tonne, the statement said.

Hot-rolled and cold-rolled steel will cost an additional NT$4,500 and NT$4,320 per tonne respectively, electro-galvanized coil wire will cost NT$4,000 more per tonne, electrical coil wire NT$5,000 more per tonne and hot-dip zinc-galvanized sheets NT$4,050 more per tonne.

The price hike announcement comes amid supply concerns after US iron ore prices surged, with free on board, or export, prices of hot-rolled products reaching US$1,240 per tonne, China Steel said.

Steel prices also soared to record levels in Europe, where major steelmakers announced price hikes ranging between US$186 and US$296 per tonne for next month, it said.

Steel mills in Asia are also raising their prices as supplies in the region have dwindled dramatically as a result of strong demand in China.

Japanese steelmakers announced price hikes of ¥30,000 for domestic customers and between US$1,000 and US$1,100 for exports, China Steel said in its statement.

Capital Securities had a “hold” recommendation on China Steel, with a 12-month target price of NT$55. On Tuesday Yuanta Securities Co (元大證券), the nation’s largest brokerage, recommended that investors sell China Steel with a target price of NT$42.4.