China Steel Corp. Nominal Price for Jul.-Aug. 2013

2013-05-31

The pace of global economy recovery is still slow. In May, a forecast institute predicted that 2013 global economic growth would slip to 2.5%. In Europe, unemployment rate continues to rise, and investment as well as consumer confidence sees no sign of recovery. In the US, the manufacturing sector expansion turns slow, and the goverment's deficit cut and tax hike measures, as well as the possible withdrawal of monetary easing policy, have become a public concern about economic growth.

In China,  econimic performance in Q1 is away from expectation, facing the double pressure from over capacity and housing market regulation. In Taiwan, foreign PO and domesic demand see decline due to global recession, and Directorate General of Budget, Accounting and Statistics has revised the 2013 GDP growth rate to 2.4%.

Steel demand in Q2 (peak season) is not as expected due to slow global economic growth, which further causes deteriorating unbalance of steel supply and demand, weak market confidence, insufficient capacity reduction in factories, "wait-and -see" steel users in the after market, storage reduction, and continuous drop of European and American steel price deriving from lack of demand. Stricken by excessive supply and substantial low-price export from China,  Steel price in Asia drops significantly.

It will be difficult to stimulate Q3 global demand for steel because of several factors such as summer vacation in Europe and US, rain season in Southeast Asia, and Ramadan in Middle East. However, international steel price drop is already close to production cost, and steel plants will reduce more on production, so expectedly there is little room for further price drop. Due to the unrest of the international political and economic condition, and low-price competitors from China, domestic downstream steel companies' PO number is not as expected and material purchase turns conservtive. To correspond to the market status and elevate global competitiveness of downstream companies, China Steel Corp. decides to lower domestic sales price of various steel products for July and August by 4.66%, which is an average of NTD 1008 per ton.