China Steel’s price cut re­flects weak de­mand: an­a­lysts

The China Post - - LOCAL -

A de­ci­sion by China Steel Corp. ( ) to lower do­mes­tic whole­sale prices for June de­liv­er­ies showed weak de­mand in the global mar­ket, an­a­lysts said Satur­day.

It was the fifth con­sec­u­tive cut by China Steel amid un­cer­tainty over the global mar­ket since the steel maker left its do­mes­tic whole­sale prices un­changed for Oc­to­ber to Novem­ber 2014.

An­a­lysts said that due to con­stant fall in global steel prod­uct prices, many lo­cal down­stream steel firms have asked China Steel to fur­ther lower its do­mes­tic whole­sale prices in a bid to strengthen down­stream steel ex­porters’ com­pet­i­tive edge.

In ad­di­tion to the weak­en­ing de­mand in the global steel mar­ket, prod­uct prices have been af­fected by a move by sev­eral sup­pli­ers, in­clud­ing China and South Korea, to dump their steel prod­ucts in the world mar­ket, they said, adding that prices have showed no signs of a re­cov­ery any time soon.

In a price de­ci­sion mak­ing meet­ing, China Steel de­cided to cut its whole­sale prices by 7.4 per­cent or NT$1,285 ( US$41.19) per met­ric ton on av­er­age for June de­liv­er­ies. The mag­ni­tude of the price cut was even deeper than the pre­vi­ous re­duc­tion of 5.2 per­cent for April-May con­tracts.

China Steel said that although sev­eral ma­jor cen­tral banks in the world, such as the Bank of Ja­pan and the Euro­pean Cen­tral Bank, have kept pump­ing funds into the mar­ket to stim­u­late the econ­omy, the global eco­nomic cli­mate still faces in­ter­rup­tions re­sult­ing from fi­nan­cial volatil­ity and geopo­lit­i­cal ten­sions.

The In­ter­na­tional Mon­e­tary Fund has cut its growth fore­cast for the U.S. econ­omy, the largest in the world and one of the largest steel con­sumers, to 3.1 per­cent for 2015 from an ear­lier es­ti­mate of 3.6 per­cent, cit­ing the im­pact from a stronger dollar.

In the first quar­ter of this year, China’s econ­omy grew only 7 per­cent year-on-year and 7 per­cent in the first quar­ter, lower than the 7.3 per­cent recorded in the pre­vi­ous quar­ter. The first quar­ter fig­ure was the slow­est growth since the first quar­ter of 2009, when China’s econ­omy grew 6.6 per­cent.

China Steel said that since the global econ­omy is grow­ing at a lower-than-ex­pected pace, steel de­mand has been on the decline. Un­der such un­fa­vor­able cir­cum­stances, many coun­tries have been low­er­ing their steel ex­port prices to se­cure or­ders.

In the Fri­day meet­ing, China Steel has de­cided to cut steel plate prices by NT$1,045 per met­ric ton, steel wire rod prices by NT$1,090, hot rolled steel prices by NT$1,500 and cold rolled steel prices by NT$1,499 for June de­liv­ery.

The steel maker has also low­ered elec­tro-gal­va­nized steel prices by NT$1,200 per met­ric ton, elec­tri­cal steel prices by NT$700 and hot-dipped zinc-gal­va­nized steel prices by NT$1,200 for June con­tracts.

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