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Taiwanese Steel Suppliers Look to Rosy Q4 Amid Upbeat Market Prospects

Oct 01, 2014 | By Steve Chuang

With international prices of coking coal and iron ore, as well as Japanese, Chinese and Korean steelmakers' prices of hot and cold-rolled steels gradually stabilizing to indicate increasingly brightening market prospects, Taiwanese steel suppliers are expected to enjoy rosy performance in Q4, the  industry peak.

Market observers say after sluggish demand during most of Q3 due to seasonal factors, the global market for steel shows many positive signs of a steady recovery. For instance,  international prices of iron ore and coking coal have recently stopped dropping to regain momentum to reach around US$95 and US$115 per tonne, respectively.

Simmering market demand in the U.S. is increasingly strengthening local steelmakers' resolve to raise prices, while steel prices in Europe are expected to strongly rebound after having stayed at all-time low for some time mainly due to local suppliers' recent periodic maintenance.

Market prospects in Asia are also increasingly upbeat. Domestic demand for steel in China is bottoming out after market prices and suppliers' nominal prices both hit nadirs recently. Meanwhile, Japanese steelmakers are clearly adamant to keep both export and domestic prices high, primarily because of waning impacts from consumer-tax hikes on both the industry and domestic market, coupled with local downstream manufacturers  restocking after seasonal recession.

Market observers say international steel prices won't drop further in the near future, based on the fact that FOB (free on board) prices of China's hot-rolled steels exported to Southeast Asia have risen to US$505-515 per tonne, while CIF (cost, insurance and freight) prices of Japanese and Korean exports of hot-rolled steels have also grown to US$560-570 per tonne.

Under such scenario, Taiwan's major steel manufacturers are very likely to enjoy an even brighter H2 this year than in H1.

One supplier already benefiting from such brightening prospect is China Steel Corp., the largest steelmaker in Taiwan by size, which confirmed earlier that its capacity for Q4 is nearly fully booked, mostly for hot-rolled steel coils, to result in improving sales for downstream manufacturers, including Sheng Yu Steel Co., Ltd., Hsin Kuang Steel Co., Ltd. (steel re-rolling) and Mayer Steel Pipe Corp. (steel pipes).

China Steel's directors say it received orders to fill Q4 totaling about 3.05 million tonnes, with capacity for hot-rolled steel, wire rods, cold-rolled steels and galvanized steel coils all fully booked, except that of steel plates, which is short some 3,000 tonnes under-capacity due to ongoing facility upgrades.

China Steel has also profited from fastener manufacturers, including Chun Yu Works & Co., Ltd., Tycoons International Groups Co., Ltd., San Shing Festech Corp. and Jau Yeou Industry Co., Ltd., who all have seen orders surge in both value and volume for some time and are expected to land more orders in Q4, when foreign buyers  begin restocking prior to Christmas and the year's end.

China Steel finished H1, 2014 with consolidated revenue of NT$184.577 billion (US$6.152 billion) and pretax profits of NT$11.694 billion (US$389.8 million), or NT$0.75 per share. The firm's performance in H2 may exceed that in H1, say institutional investors, given that its orders received in Q3 total 3.17 million tonnes to exceed 3.07 million tonnes in Q2, with its prices likely to rise further in Q4.

China Steel's affiliate, Chung Hung Steel Corp., maker of hot- and cold-rolled steels and steel pipes, just reported consolidated revenue of NT$19.46 billion (US$648.66 million) for H1, down 4.89% year-on-year (YoY), and net profits of NT$154 million (US$5.133 million) and EPS (earnings per share) of NT$0.12 for Q1. Institutional investors believe the firm's performance will further pick up steam in H2, especially when the U.S. Department of Commerce just  ruled that Chung Hung's oil pipes sold stateside are exempt from  antidumping penalties.

China Steel Structure Co., Ltd., a steel structure supplier affiliated with China Steel, has also seen production lines booked throughout 2014, therefore likely to see stronger performance in H2 than in H1. The firm's consolidated revenue for H1 amounted to NT$8.943 billion (US$298.1 million), down 10.46% YoY, with net profits of NT$68 million (US$2.26 million), or NT$0.35 per share, for Q1. (SC)


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