China Steel’s price cut reflects weak demand: analysts
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.