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CSC Likely to Lower Nominal Prices of Steel in Q3 Amid Downtrend of Int'l Iron Ore Prices

2014/05/30 | By Steve Chuang

With international prices of iron ore recently sinking to below US$100 per tonne and hitting a two-year low, China Steel Corp. (CSC), Taiwan's largest steelmaker by size, will likely be forced to cut its nominal prices of steels, such as hot and cold-rolled steels, in the third quarter of this year.

The recent price drops of iron ore have disappointed the Taiwanese steelmaker, who optimistically forecast early this year prices of the raw material should remain over US$104 per tonne for some time, at least throughout the first half of this year.

In fact, after diving 0.75% during January-February, CSC's average nominal price of steels has steadily trended upward, by 1.2% in March and then 0.37% in April-May, mostly due to brightening market outlook.

In the face of weakening prices of iron ore, which has increasingly put pressure on CSC to cut nominal prices in the third quarter, the firm's directors emphasized that it remains uncertain if the firm will cut nominal prices of its  domestically sold steels, given the ever-changing international steel market, and that material costs are not the main consideration in price adjustment.

Institutional investors said that lower nominal prices of steels will surely dampen to some extent CSC's performance in the third quarter, but, in turn, will benefit local re-rolling firms, including Yieh Phui Enterprise Co., Sheng Yu Steel Co. and Prosperity Tieh Enterprise Co.

CSC's latest financial report shows consolidated pretax profits hit a single-month high of NT$2.094 billion (US$69.8 million) in April, when operating incomes totaled NT$2.16 billion (US$US$72 million) for a 21% surge over a month ago. For the first four months of this year, cumulative pretax profits totaled NT$7.167 billion (US$238.9 million), or NT$0.47 per share. (SC)