Steel prices drop in China and Taiwan

John Wolz

Editor”s Note: The following column is presented by Taiwan-based Fastener World magazine as part of a news column exchange with FIN.
China Bao Steel unveiled a 16% price drop for the first quarter of 2006, thwarting China Steel Corp. of Taiwan”s plan to keep prices stable. In the past two quarters, the product price of Bao Steel has dropped over 25%. This has forced China Steel to follow with an 11% decline in prices, reportedly the largest single price reduction for the company in a decade. Except for electroplated steel sheet, prices for all the other six steel products were cut. The product with the most dramatic price decline was electromagnetic steel sheet, which dropped 17%.
China has reduced the steel price to market
In the past few years China has over-invested in steel production, forcing neighboring Asian countries into a price war to combat dumping on local markets. After China Bao Steel and Taiwan China Steel lowered their Q1 market price for 2006, the international steel market price variation became severe. Because the U.S. is under the demand of economic growth, inventory adjustment and hurricane disaster rebuilding, the hot-rolled steel price has risen 12% to $617 per ton. In the EU, the main steel production line has substantially fulfilled the capacity-reducing strategy. Factoring in the fact that the Euro is devalued, while imports are restricted and energy costs have risen, the main steel plants have announced that the price of steel plate has increased as much as Euro 20 in Q1 of 2006.
So far the price difference between Asian and Western markets has already increased as much as $250 per ton. To solve the over-production problem, China has increased exports of steel products that have impacted international markets, prompting allegations of dumping. Both the U.S. and Indonesia have filed anti-dumping actions against China imports. Sliding prices in China, couple with declining global steel demand, make it difficult to sustain the high price of steel in the U.S. & EU markets.
Price benefits for fastener industry minimal
Compared to inadequate communications in the past between China Steel Corp. and its clients, this time CSC has received a good response from vendors by lowering steel wire prices to a level that gives clients a chance to compete with manufacturers in China. After CSC cut hot-rolled steel coils price to US$70.6 per ton, the unit price is now lower than what the China Bao Steel offers domestic clients.
Despite reductions, fastener manufacturers in Taiwan are still paying prices that remain higher than the going rate on the international market. Fastener vendors in Taiwan struggle to compete against China vendors. For Taiwan companies, the only way to control costs is to minimize operating expenses. Some local vendors claim that the current price-down would increase customers” attempts to bargain for price reductions a situation sure to cause losses for fastener vendors.
Moreover, because of China”s dominance in the regional steel market, the price of steel plate has dropped, forcing China vendors to begin producing wire steel products. This scenario forces down the costs of wire steel products in China, giving China fastener vendors more room to drop product prices while Taiwan manufactures face increased pressure to relocate operations to lower cost areas.
China Steel Corp. first-quarter 2006 prices for steel plate dipped 4.5% to US$22.05 per ton; steel bar/wire dropped 9% to US$33.97 per ton; hot-rolled steel prices declined 15% to US$70.6 per ton; cold-rolled steel dropped 10% to US$55.42 per ton; and electromagnetic steel fell 17% to US$111.75. \ �2006 FastenerNews.com