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China Steel boosts Q2 shipment guidance on international price cuts

TAIPEI, Taiwan -- China Steel Corporation (CSC, 中國鋼鐵) said its shipments may rise up to 3.06 million metric tons in the second quarter and hit 3.16 million metric tons in the third quarter.

CSC is Taiwan's largest steelmaker by size. In May alone, CSC's shipping is expected to hit around 78,000 metric tons and its subsidiary company Dragon Steel's (中龍鋼鐵) shipments of hot-rolled coil were about 31,000 metric tons.

The company predicted its shipments in the third quarter will hit 3.16 million metric tons, an increase of 3 percent compared to the previous quarter.

According to local media reports, CSC is likely to lower nominal prices of steel in the third quarter amid a downward trend in international iron ore prices.

With international prices of iron ore recently sinking to below US$100 per metric ton and hitting a two-year low, CSC will likely be forced to cut its nominal price of steel, such as hot- and cold-rolled steel, in the third quarter of this year.

CSC has cut its prices by an average of 1.64 percent for July and August compared with those for June.

Despite the weakening prices of iron ore, which have been increasingly putting pressure on CSC to cut nominal prices in the third quarter, CSC told local media that it remains uncertain if it will cut nominal prices of its domestically sold steel, given the ever-changing international steel market and the fact that material costs are not the main consideration in price adjustment.

Key Raw Material Price Drops

United Daily News reported that the recent price drop in iron ore has disappointed the island's largest steelmaker, which earlier this year optimistically forecast that the price would remain over US$104 per metric ton for some time, or at least throughout the first half of this year.

CSC Chairman Tsou Jou-chi (鄒若齊) recently said at the company's shareholders' meeting that the price decline would be milder in the third quarter, but it is still too early to tell whether the company's profits for this year will be higher than last year as the visibility of the industry remains low.

After diving 0.75 percent during January-February, CSC's average nominal price of steel has steadily trended upward, by 1.2 percent in March and then 0.37 percent in April-May, mostly due to a brightening market outlook.

The company's pre-tax profit for the first five months fell 23.34 percent year-on-year to NT$9.36 billion, and Tsou blamed the decline on falling prices amid less-than-expected demand.

CSC shareholders recently approved a plan by the company to issue a cash dividend of NT$0.7 and a stock dividend of 0.02 percent.

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