Price Adjustment for 2018 Fourth Quarter Domestic Prices

2018-08-29

In July, IMF estimated global GDP 3.9% in 2018 that was the same as April forecast. US economy was robust along with strong private consumption on spillover effect by sustaining fiscal stimulus. Although European Central Bank downsized the scale of bond buying, Eurozone economy was stable on low interest rate underpinning business confidence. China economy went volatile due to trade war but may stabilize by expanding governmental expenditure in the second half, easing monetary policy and resuming China-US negotiation. Latest Taiwan GDP forecast was revised to 2.69% due to strengthened export and industrial production.

Despite rising protectionism, ArcelorMittal estimated global steel demand growth ranging from 2% to 3% that was higher than Jan forecast by 0.5%. China steel export was down 15% yoy due to tightened ”Blue Sky Plan” while Korean steel mills conduct periodic maintenance in Q4 and Japan has been keeping low export momentum due to stable home market demand. Consequently the supply in Asia market remains tight. Taking hot-rolled coil for example, the price in US rallied around US$987/MT; US$643-666/MT prevailed in Europe amid Safeguard and seasonal low demand in summer; Japan and Korea offered US$630-650/MT FOB instead. Baowu and Angang hot-rolled coil edged up by US$15-22/MT accumulatedly for Jul-Sep shipment in response to Fixed Asset Investment on track and bullish demand for real estate. The Q4 price in China is expected to gain on account of supplementary budget for infrastructure, strict winter production cut and low inventory.

Taiwan's Q2 GDP beat expectation while base metal export kept soaring for 24 months in a row. The demand for medium/heavy steel plate was strong coupled with newly infrastructure and construction projects from Q3 onwards. The prospects of domestic market keeps going moderate to rosy in terms of both rising volume and unit price of screw and electro-mechanical manufacturers. Lately New Taiwan Dollar was depreciating by 3% against last quarter that will benefit export. In view of trade protectionism such as EU safeguard, the USA Section 232 and Turkey Lira/India Rupee depreciating substantially, CSC hikes Pan-hot rolled steel, keeps cold-rolled coil (CRC) and electro-galvanized (EG) flat and cut the price of electrical steel (ES) in Q4. The weighed average adjustment is up by NTD 326/MT, or 1.4% equivalently.