Hot-roiled steel maker Chung Hung Steel Corp (中鴻鋼鐵) expects to receive only short-term rush orders ahead of potential price hikes next month, following recent price hikes by China’s major steel mills.
Chung Hung Steel is a 29 percent owned steel mill of Taiwan’s top steel company, China Steel Corp (中鋼).
“Steel demand is still weak,” Wang Chao-cheng (王朝成), a vice president of the company, said last week. “We are a bit worried that our clients just want to buy as much as they can before we raise our prices.”
Chung Hung expected monthly shipments to increase to 180,000 tonnes this month and last month, from 160,000 tonnes per month on average in recent months.
However, Wang felt industry visibility remains low due to market changes.
“We hope we are able to sustain our sales volume until next month,” he said.
Wang’s cautious attitude came after price hikes by major Chinese steel mills Wuhan Iron and Steel Corp (武鋼) and Baoshan Iron and Steel Co (寶鋼) for their shipments next month, a move that is expected to build price-hike momentum for regional steelmakers including Taiwan’s.
According to Wang, the global steel market was heavily influenced by large-scale production in China, but production levels in China have fallen this quarter after companies suffered from oversupply last quarter.
A JPMorgan Securities (Asia-Pacific) Ltd report issued on Sunday last week said that steel production in China has declined since late last month, with production from large mills falling on seasonal maintenance and from small mills remaining steady.
Chung Hung is scheduled to announce its steel prices for next month’s contracts on Aug. 28.
Jeremy Chen (陳建名), Credit Suisse’s Taipei-based analyst, forecast China Steel would increase prices on the back of better near-term fundamental outlook.
“We expect price increase of 1 to 2 percent” above next month’s levels, Chen said in a note on Tuesday last week.
China Steel said the prospects for the global steel market are improving as steel prices in Japan, the US and China have increased recently, and the company’s plants are running at full capacity to satisfy orders for this quarter.
However, Chen said the rising orders at China Steel were partially due to the company’s scheduled shutdown of its No. 4 blast furnace, which accounted for 26 percent of its total capacities, for a more than five months maintenance through to early next year.