China Steel Corp (中鋼) yesterday announced bigger-than-expected price cuts for July and August contracts due to persistent oversupply in China.
The nation’s only integrated steelmaker will lower domestic steel prices for July and August by an average of 4.66 percent, or NT$1,008 (US$33) per tonne, after it cut domestic steel prices for next month’s shipments by 2.08 percent on average a month ago, a company statement showed.
“The average crude steel production in China is still between 2.15 million tonnes and 2.2 million tonnes per day this month, not far from its record of 2.21 million per day in February,” China Steel vice president Liu Jih-gang (劉季剛) said by telephone.
Liu said the global economy this year has not been as good as expected, which has also dragged down demand for steel.
Chinese steel mills have reduced their export prices, causing many in the industry around the world to drop their prices accordingly, he said.
The next quarter is the traditional low season for the industry, the company said, as work days in the US and Europe decline, the rainy season in Southeast Asia starts and works slows in the Middle East during Ramadan — which begins in July this year.
However, Lin Chung-yi (林中義), another vice president, said China Steel is still likely to register a profit in the next quarter.
“Our profit margin may shrink because of the price cut, but our cost reduction measures will help us stay profitable,” he said by telephone.
China Steel’s cost reduction efforts have enabled it to post a better-than-expected pretax profit of NT$8.54 billion in the first four months, compared with losses of NT$269.23 million a year ago, Grand Cathay Investment Services Corp (大華投顧) analyst Tsai Yen-ling (蔡燕鈴) said.
Tsai said China Steel’s latest price cuts were larger than she expected, hinting that it might be because of the weak market sentiment faced by the company’s clients.
“China Steel’s downstream companies have to compete with firms abroad. Therefore, as global steel prices go down, China Steel has to lower its prices as well to make its clients competitive,” she said.
China Steel’s new cuts reduce the prices for benchmark hot-rolled sheets and coils by NT$946 per tonne and those for cold-rolled sheets and coils, which are used mainly in the automobile industry, by NT$1,106 per tonne.
Steel plates will be NT$569 less per tonne, while hot-dipped, zinc-galvanized sheets will drop by NT$963 per tonne and electro-galvanized sheets will be lowered by NT$600 per tonne.
Prices of steel bars, rods and electrical sheets, which are used to manufacture home appliances, will drop by NT$1,363 per tonne, while electrical sheets prices will decline by NT$513 per tonne.
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