Tuesday, March 24, 2009

Chinese steelmakers feel the price pinch

Chinese steelmakers are headed for troubled times as steel products makers are finding it tough to sell their products due to the narrow price gap with global prices, analysts said yesterday.

In February, China exported only 1.56 million tons of steel products, down 50 percent year-on-year. This is the lowest monthly export since October 2004 and the second straight month when exports fell, said Zhang Shibao, analyst, China Merchants Securities.

Steel prices have weakened as demand has slumped in most of the markets. In many countries like Russia and South Korea domestically made steel products are now cheaper than Chinese products.

"Chinese steel producers are losing their price advantage," said Hubert Tang, analyst, UBS.

"In 2007 and 2008, Chinese exports accounted for 12 to 13 percent of the overall market, but now exports have fallen to just 2 to 3 percent," said Hu Kai, analyst, Umetal.com, a metals information provider. The balance 10 percent steel products may not find too many takers considering the saturated domestic market now, he said.

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