China Steel's pricing shows market stabilizing: analysts
July 20, 2014, 12:00 am TWN
TAIPEI--A move by China Steel Corp. (中鋼), Taiwan's largest steel maker, to leave its domestic wholesale product prices unchanged showed the market has been stabilizing, analysts said Saturday.
In a pricing meeting held a day earlier, China Steel decided to maintain its domestic wholesale product prices for September contracts after a 1.64 percent cut for the July-August delivery, citing an economic recovery at home and abroad.
Analysts said the latest pricing indicated China Steel has turned more upbeat about the market outlook for the second half of this year, adding that the steel industry could have a better second half than first.
After a decision to leave its domestic wholesale prices intact for September, China Steel issued a statement explaining its move.
It said that while the U.S. Federal Reserve will continue to wind down its monthly bond buying program, the country's economy is on the way to recovery and the pace is accelerating.
Meanwhile, the European Central Bank has maintained ample liquidity by cutting its deposit rates to negative since early last month to give another boost to the eurozone's economy, China Steel said.
As a result, steel demand from the U.S. has been on the rise, which has reinforced the attempt by steel makers in the U.S. to raise prices. And with steel prices in the European market having fallen to a record low, there is little room for prices to trend lower there, the Taiwanese company said.
China, one of largest steel buyers in the world, was also a reason for optimism. Its recent measures to stimulate the economy and strengthen infrastructure construction have paid off, with its gross domestic product up 7.5 percent year-on-year, beating an earlier market estimate of 7.4 percent.
The Taiwanese firm said confidence in the demand for steel in China's market is improving as wholesale product prices have bottomed out.
Meanwhile, China Steel said it posted NT$11.69 billion (US$390 million) in pretax profit for the first half of this year, down 4.23 percent from a year earlier. Its earnings per share before tax for the six-month period stood at NT$0.76, down from NT$0.8 recorded a year ago.
In June alone, the company's pretax profit rose 48.53 percent from a year earlier to NT$2.33 billion.
In the first half of the year, China Steel sold about 4.8 million metric tons of carbon steel with 64 percent of the products shipped to the local market, the company said.