Posted on 12 Jun 2012
Analysts said that China Steel Corporation has posted a pretax profit for the third straight month in May 2012, but the nation's largest integrated steel maker faces continued headwinds this quarter and next quarter, because of global economic uncertainty and an industry wide glut triggered by increased Chinese exports.
Mr Tsai Yen ling analyst at Grand Cathay Investment Services Corporation said that "The ongoing debt problem in Europe has dampened market visibility on demand and caused customers to be conservative in 2012."
Me Tsai's remark came after the Greater Kaohsiung based company reported a pretax profit of TWD 1.056 billion for last month, which was 49.15% higher than the previous month.
CSC said in a statement that on an annual basis, last month's pretax profit plunged 68.08% from the same month of 2011. Revenue for May 2012 increased by 3.24% MoM to TWD 20.091 billion from the previous month, down by 5.18% YoY.
Mr Tsai maintained her profit forecast for China Steel for 2012, expecting net income of TWD 12.1 billion or earnings per share of TWD 0.81, down by 37.7% YoY on revenue of TWD 229.1 billion, down by 4.7% YoY.
While lower prices of raw materials such as iron ore have helped China Steel post a pretax profit of TWD 786 million in the first five months of 2012, the numbers were nearly halved from the TWD 14.384 billion China Steel reported in the same period of last year, reflecting still weak market sentiment so far in 2012.
Ms Mandy Lin analyst at IBTS Investment Consulting Co said that "The spot steel prices dropped by US$20 to US$30 per tonne recently in the East Asian market because of increased Chinese steel shipments. East Asian steel market demand is expected to stay weak in the third quarter, before picking up in the fourth quarter on China's easy monetary policies and infrastructure construction projects."
Ms Lin expects China Steel to lower domestic prices by between USD 10 and USD 20 a tonne for its September 2012 deliveries next month, when the company announces its price adjustment plans, after it left domestic prices for July to August 2012 shipments mostly unchanged.
