Taiwan's steel prices expected to rise on Chinese production cuts

Affected by cuts in steel production by China, the world's largest maker of the metal, Taiwan's steel prices are likely to rebound after hitting bottom in the second quarter of this year, local steel companies said Steel production by China, the world's largest energy consumer, may decrease by 10 percent in September because China has begun restricting power supply to mills this month to meet its energy efficiency targets, according to the Taiwanese steel makers.
China's energy consumption per unit of GDP is required to be reduced by 20 percent, from 2006 to 2010.
With reductions in China's steel production expected to step up between October and December, Chinese steel prices will continue to rise until the end of this year, and that will boost steel prices in Asian markets, including Taiwan's, Taiwanese steel producers said.
"The rise of Chinese steel prices will also reduce the possibility of the dumping of Chinese steel products in Taiwan, and that will help stabilize, or even boost Taiwan's steel prices, " said an official of a local downstream steel firm, who declined to be named.

He said that the prices of hot-rolled and cold-rolled steel from Taiwan's Chung Hung Steel, which relies on imports of steel billets for manufacturing steel products, are expected to show the first sign of local steel price movements.
"As Chung Hung Steel's hot-rolled steel prices were reported at US$625 in September -- about US$12.6 lower than the market prices, the company may raise its steel prices by US$9.5 to US$15.8 in October, " the company official said.
If Chung Hung Steel raises its steel prices, other middle stream and downstream steel firms will likely follow suit, and pull up local steel prices, he added.
Asian steel prices have been falling since the second quarter of this year, because Chinese authorities have started to take stringent measures to control its real estate markets for fear of a bubble.
That has also dampened demand in steel markets.
Steel inventories generated by an over-supply in Chinese steel markets has led to the dumping of Chinese steel products in overseas markets.
November's wholesale prices reported by Taiwan's largest steel producer China Steel Corp. in late August -- were 9.66 percent lower than three months ago.

Source: Channel News Asia