According to institutional investors, fretted by a faltering market along with weak steel prices, China Steel Corporation, the largest steelmaker in Taiwan by output, is likely to see its pretax profits for 2012 plunge to an 11 year nadir of less than TWD 8.1 billion posted in 2001.

CSC, the only steelmaker with blast furnaces in Taiwan and having paid in capital of over TWD 150 billion, has scored pretax profits of TWD 10 billion at least in each of the past 10 years after 2001, well recognized for its sustainable profitability.

However, the company may fail to maintain the prosperity in 2012 for some reasons, especially after reporting only TWD 1.93 billion in pretax profits for the first half.

A persistently slack global market for steel this summer is among reasons behind CSC's gloomy profit forecast, and the firm's executives admitted that market demands during the period are expected to wane as usual for seasonal factors.

What's worse, the executives added, severely excessive supply of steel, which has caused international prices to spiral downward since the second quarter of this year to heavily dampen the global steelmaking industry, still needs time to ease, because most global steelmakers, in order to turn profitable amid price competition and a sagging market, have yet to cut their capacity utilization for the time being.

In addition to a flagging global market, CSC will also suffer from deteriorating operating performance in the third quarter partly because its costs of coal and iron ore used will increase, and partly because the company has decided to cut its domestic steel prices by 5% per tonne starting September. Along with rising material costs, the price cut, which the company confirmed is even applicable to its steels sold in July and August 2012, will heavily erode its profits for the quarter.

Therefore, although international steel prices are estimated by WSD (World Steel Dynamics), a world-caliber steel market information service provider, to rebound in the fourth quarter, institutional investors are widely pessimistic about China Steel's profit performance for the whole year.

Source - CENS

(www.steelguru.com)