China Steel Corp. Taiwan's largest steel producer by revenue, is considering raising the price of domestic products for July and August, Executive Vice President L.M. Chung said Wednesday.
"Demand has picked up and supply will fall," Chung told Dow Jones Newswires.
The company will hold a price meeting next Wednesday. If prices are raised, it would be the first hike for the company since the last quarter of 2008.
The company's downstream customers have raised their resale prices, and "we will reflect that," he said, but declined to be more specific on prices.
China Steel shut its 2.8-million-metric-ton-a-year No. 3 blast furnace in mid- April for maintenance and will shut its 1.9-million-ton-year No. 1 blast furnace in November, Chung said.
The resulting reduced supply will also help put a floor under prices, Chung added.
China Steel lowered prices for the first quarter by a record 22.56% versus the fourth quarter. It also cut prices by 14.03% in the April-May period versus the first quarter, and by 9.41% for June compared with the April-May period.
Since it is company practice to give price rebates for the previous quarter if cuts are planned for the subsequent quarter, each round of cuts effectively means an additional price cut for the previous period.
China Steel posted a net loss of NT$7.18 billion in the quarter ended March 31 and a net loss of NT$15.45 billion in the last quarter of 2008.
In a research note Wednesday, Credit Suisse forecast China Steel's loss would narrow to NT$233 million in the current quarter thanks to cheaper raw materials and recovering shipments.
In a statement Wednesday, China Steel said it agreed with Rio Tinto PLC (RTP), the world's second-biggest producer of seaborne iron ore, on a 33% cut for fine ore and a 44.4% cut for lump ore for the 2009 contract year.
Chung said although the contract year starts Apr. 1, the company would continue using higher-priced ore through September because of carry-over deliveries from last year.
He said the company was still negotiating with the other two major suppliers of iron ore - Brazil's Vale S.A. (VALE) and Anglo-Australian BHP Billiton Ltd. (BHP), the world's biggest and third-biggest producers of seaborne iron ore, respectively.
Chung said the company expects a "similar" price cut from BHP and a larger cut from Vale because of the higher shipping costs involved.
China Steel normally uses about 15 million-16 million tons of iron ore annually, with each of the three majors supplying about a third of its needs, said Chung.
SourcE: CNN
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