China Steel planning to raise prices next month

China Steel Corp yesterday said it would raise its prices slightly for some products and leave others unchanged for domestic deliveries next month, after leaving them unchanged for two consecutive months.

The nation’s largest steelmaker said in a statement that it had accounted for downstream customers’ inventory replenishment demands and their export competitiveness, as the global steel market has staged a steady recovery.

As a result, it would increase prices for hot-rolled steel plates and coils, and cold-rolled steel coils by NT$300 per tonne (US$9.25), while keeping prices unchanged for other items such as electro-galvanized steel coils, hot-dipped zinc-galvanized steel coils and electro-magnetic steel coils, the Kaohsiung-based steelmaker said.

“The global steel market still faces oversupply, although demand is improving. Therefore, steel prices might stabilize in the short term due to seasonal demand or in response to inventory adjustments ending, but the company would not see a marked improvement in its product spreads in the medium term until there is further consolidation in the industry,” Fubon Securities Investment Services Co (????) said in a note ahead of the release of China Steel’s price data.

Spreads refer to the difference between raw material costs and product prices, with China Steel facing narrower spreads amid rising costs over the past few quarters, indicating continued profit margin pressure.

In the first quarter, the firm posted an operating profit of NT$769 million, down 71.1 percent from the previous quarter, although revenue grew 6.1 percent sequentially to NT$93.75 billion and sales volume increased 6 percent to 2.88 million tonnes.

The decline in operating profit was mainly because prices of iron ore and coking coal rose 13 percent and 31 percent respectively quarter-on-quarter, while China Steel’s product prices only increased by a maximum of 5 percent over the quarter, the company said late last month.

First-quarter pretax profit fell 46.3 percent quarter-on-quarter to NT$1.48 billion, but improved significantly from a year earlier thanks to gross margin and sales volume growth, as well as non-operating investment and foreign exchange gains, the firm said.

China Steel yesterday said that raw material prices are still increasing due to an improved outlook in China, with iron ore costing US$115 to US$120 per tonne, up more than 20 percent from last month’s lows, and coking coal costing US$240 to US$245 per tonne, an increase from US$220 to US$230 per tonne a month earlier.

However, the company said it is positive about the price outlook in the near term, as several European steel mills recently announced price increases and signs of a rebound are starting to emerge in Southeast Asia.

Chinese peers Baowu Steel Group Ltd, Angang Steel Group Co and Benxi Steel Group Co also slightly raised their steel plate prices for next month, further bolstering market sentiment, China Steel said.