China Steel Corp (中鋼) will lower its domestic steel prices by a record average of 22.56 percent for the fourth quarter, the nation’s largest and only integrated steel maker said yesterday, marking the firm’s first price cut in almost three years.
The cuts of NT$7,058 (US$211.90) per tonne aim to move the company’s prices “closer to market levels” while helping “enhance the competitiveness of its domestic customers,” the Kaohsiung-based company said in a statement.
The cut followed on the heels of similar moves by Baoshan Iron & Steel Co (Baosteel, 寶鋼), the biggest steel maker in China, in recent weeks. It also came as Taiwan’s economy falls into recession and domestic demand for autos and construction materials continues to wane.
Baosteel last week cut its steel prices for a fourth time in two months and priced hot-rolled steel products at US$710 per tonne for next month, which China Steel said was close to the US$670 production cost at world-class steel makers.
“The chances for China Steel to further cut its prices in the second quarter are high as there is still room for prices to drop,” Angela Chuang (莊慧君), an analyst at Capital Securities Corp (群益證券), said by telephone yesterday.
Chuang said China Steel’s prices would remain relatively higher than international levels in the first quarter, adding that the company should further cut its prices by NT$3,000 to NT$4,000 per tonne, or between 15 percent and 20 percent, in the second quarter.
International steel prices are likely to stabilize in the second and third quarters of next year, Chuang said.
But as China Steel lags behind international prices, she expected the steel maker’s prices in the third quarter to remain at second-quarter levels.
On Tuesday, China Steel announced it would temporarily shut down two of its four blast furnaces next year for two to three months each to cut capacity by at least 1 million tonnes next year.
The company has joined its global counterparts in cutting output to stem falling prices as it believes low-priced competition would not stimulate market demand, but sideline potential customers on expectations of further drops.
“Mainstream steel makers should at the current stage cope with customer demand to adjust market supply appropriately and to help smoothly clear downstream customers’ steel inventories,” it said in the statement.
Under the company’s latest price adjustment, steel plates would cost NT$4,550 less per tonne, while bar and wire rod prices would drop NT$7,000 per tonne, the statement said.
The price of hot-rolled and cold-rolled steel would be reduced by NT$7,840 and NT$7,510 per tonne respectively, electro-galvanized coil wire and electrical coil wire would each cost NT$8,000 less per tonne while hot-dip zinc-galvanized sheets would be down NT$7,680 per tonne.
China Steel’s offer to provide retroactive rebates to customers on previous quarter purchases if the company cut prices for the next quarter would inevitably drag down the steel maker’s revenue and gross margin, Chuang said.
Including its losses in non-core businesses and inventory writeoff, China Steel is likely to report a net loss of NT$0.86 per share this quarter and NT$2.28 earnings per share for this year, Chuang said.
China Steel’s shares closed 2.49 percent lower yesterday at NT$21.50 and the stock has dropped 50.58 percent so far this year, stock exchange data showed.
ADDITIONAL REPORTING BY JERRY LIN
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