The global steel market is facing short-term headwinds due to China’s unfavorable policies to rein in inflation and to achieve net-zero carbon emissions, Yuanta Securities Investment Consulting Co (元大投顧) said in a note on Friday.
However, China’s commitment to control crude steel production this year has led to price corrections recently. As Chinese steelmakers have seen profit decline to around breakeven level, there is limited room for further price cuts, with steel prices forming a bottom, Yuanta said.
Moreover, global steel demand remains robust, thanks to widespread COVID-19 vaccinations easing the global health crisis and stimulus packages by governments worldwide ushering in the post-COVID-19 era, it said.
Steel demand from construction companies and automakers has shown no signs of abating, Yuanta said, adding that steel supply remains tight due to limited shipping capacity and labor shortages.
In an earlier note on June 11, a team led by Yuanta analyst Leo Lee (李侃奇) wrote: “We anticipate steel supply and demand dynamics will be similar to those seen in the cement industry over the past two to three years. That means tightening supply, strong demand and low inventory levels.”
“This means substantial upside to steel makers’ earnings,” the analysts added.
China Steel Corp (CSC, 中鋼), Taiwan’s largest steelmaker, has benefited the most, as it last week reported pretax profit of NT$26.9 billion (US$963.9 million) for the first five months of this year, up 848 percent year-on-year, and earnings per share of NT$1.7.
CSC on June 15 said that it would not raise prices for steel products in the domestic market next month, ending 12 months of price increases, but it would raise prices by 10 percent in the third quarter.
Domestic downstream companies have benefited from price increases of CSC’s products, with order visibility for some of them extending to the fourth quarter and gross margins to remain at relatively high levels, Yuanta said on Friday.
That is because CSC’s domestic clients profit from positive global market dynamics, as they mostly export products to the EU and US, the analysts said.
“Based on international steel prices, as well as increases in iron ore and coking coal prices, we expect China Steel to raise prices further in the third quarter,” the analysts said.
“Coupled with China’s crude steel production cuts and cancelation of export tax rebates, we expect steel prices to be supported by improving global supply and demand dynamics on slower steel supply,” they added.
CSC shares fell 0.14 percent to NT$35.75 on Friday in Taipei trading, after rising 44.44 percent so far this year, Taiwan Stock Exchange data showed.
Also in the steel sector, Yieh Hsing Enterprise Co (燁興企業) gained 4.76 percent to close at NT$15.7, Chun Yuan Steel Industry Co (春源鋼鐵) rose 4.68 percent to NT$25.70, and Ta Chen Stainless Pipe Co (大成不銹鋼) added 3.12 percent to NT$47.95.
Chung Hung Steel Corp (中鴻鋼鐵) rose 0.2 percent to NT$50.7 and Hsin Kuang Steel Co (新光鋼鐵) increased 1.2 percent to NT$67.6, but Tung Ho Steel Enterprise Corp (東和鋼鐵) dropped 2.6 percent to end at NT$46.7 percent.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts