China Steel may continue to hike product prices: analyst
January 18, 2014, 12:00 am TWN
TAIPEI -- China Steel Corp. (中國鋼鐵) is expected to continue to raise its wholesale product prices in the domestic market on the back of downstream buyers' efforts to restock as the global economy improves, an analyst said Friday.
"Baoshan Iron and Steel Co. (Baosteel), the largest listed steel company in China, has hiked its domestic product prices for two months in a row, indicating that global demand for steel products is on the rise," Asia Securities Investment Consultant analyst Chang Chih-cheng said.
"I expect China Steel will follow suit to keep setting higher wholesale prices in the coming months," Chang said.
Chang's optimism over China Steel's pricing power was sparked by a decision made by the Taiwanese company Thursday to raise its wholesale domestic prices by NT$236 (US$7.87) per metric ton, or 1.2 percent on average for March contracts compared with January-February orders.
China Steel's move came after Baosteel announced an increase in its domestic product prices. The Chinese supplier announced a 2 percent price increase for its hot-rolled coil and a 2.6 percent price increase for its cold-rolled coil for February delivery.
Baosteel's pricing decisions have been closely watched by its counterparts in the region, as China is one of the largest steel consumers in the world.
First Domestic Price Hike Since Late Last Year
It was the first time China Steel had hiked its domestic prices since late last year, when prices for October-November delivery were increased by 1.86 percent.
China Steel said steel inventories in the China market have fallen to a relatively low level after months of adjustments, which has prompted buyers to restock, paving the way for a price recovery.
In addition to China, Japanese steel makers have raised prices for outbound sales, while suppliers in the U.S. and Europe have boosted prices in reflection of rising production costs caused by more expensive iron ore, China Steel said.
In its latest pricing meeting, China Steel announced that it will raise the price of hot-rolled sheet and coil prices by NT$450 per metric ton and the price of cold-rolled sheet and coil by NT$360 for March contracts.
The company has also decided to hike the price of electro-galvanized coil by NT$500 per metric ton, but left prices of other items unchanged for March deliveries.
Despite the price hikes, shares of China Steel fell 0.93 percent to close at NT$26.50 on the Taiwan Stock Exchange as investors locked in their recent gains boosted by price hike hopes.
"Investors simply sold on the news. But I still expect that China Steel's bottom line will improve due to the price hikes," Chang said.