Steel Stocks Steam Ahead Led By China Steel On Price Hike

21 April 2016

Steel stocks move higher Thursday, led by China Steel Corp. After the largest steel supplier in Taiwan raised its domestic wholesale prices for June deliveries after the price hikes seen in the previous few months at a time of rising iron ore prices in the global market, dealers said.

The current buying also reflected optimism toward the bottom line of the local steel sector for 2016 on the back of a recovery in product prices resulting from a global price rebound, they said.

As of 12:14 p.m., the steel sector had risen 1.49 percent to 89.83 points on the Taiwan Stock Exchange, where the weighted index gained 0.33 percent to 8,542.85 points.

Shares of China Steel had added 2.01 percent to NT$22.80 (US$0.71), and shares of China Steel Structure Corp. (???) had risen 2.51 percent to NT$24.55.

"The move by China Steel to raise its June domestic wholesale prices by more than 10 percent encouraged many investors to pick up the stock and (those of) other steel firms soon after the local equity market opened," Hua Nan Securities analyst Kevin Su said.

"The latest price hike simply followed a significant jump in international iron ore prices after signs of rising demand for steel in the world market," Su said. Iron ore prices rose an additional 3.1 percent overnight to US$64.77 per ton, a new high in 10 months.

In a statement, China Steel said that it has decided to raise its domestic wholesale prices by NT$1,483 per metric ton on average or 10.5 percent for June contracts after a rise of 2.3 percent for March deliveries and a 3.1 percent increase for April-May contracts.

China Steel said that the price hike came after China, one of the world's most important steel suppliers, came up with measures to cut production, which led to a fall in inventories and stimulated demand.

According to China Steel, steel prices in the U.S. and European markets have risen more than US$100 per metric ton since March. In China, domestic steel prices rose more than 30 percent in the first quarter of this year, the Taiwanese firm said.

Following the price hike decision, China Steel will raise steel plate prices by NT$1,000 per metric ton, hot rolled steel prices by NT$1,600, cold rolled steel prices by NT$1,600, and hot-dipped zinc-galvanized steel prices by NT$1,600 for June deliveries.

In addition to China's measures to rein in production and cut inventories, "the rebound in the global steel market was because major central banks in the world continued to ease their monetary policies. Ample liquidity has given a boost to prices of commodities, like steel and crude oil," Su said.

"Market sentiment toward the steel sector has been improving as many investors believe China Steel will benefit from such a global uptrend in terms of its bottom line," Su said.

Analysts said that China Steel turned a profit in February and its earnings momentum is expected to continue to pick up in the following months, adding that as it rides the wave of product price hikes, China Steel is likely to report satisfactory results for the first half of this year.


Source :