China Steel Corp (CSC, 中鋼) is facing the biggest challenges in the company’s history as a sudden drop in demand is eating into its profitability, chairman Wong Chao-tung (翁朝棟) said on Tuesday.
Wong’s comments reversed his previous remarks. A few weeks earlier, Wong said demand would pick up in the second half of this year, along with a rebound in steel prices.
“We have to strive to overcome all difficulties and to reach the goal of making profits for the whole of this year,” he said in a letter to employees seen by the Taipei Times.
Photo: Lin Jin-hua, Taipei Times
China Steel swung back to pretax profit of NT$42 million (US$1.3 million) last month. During the first eight months of the year, its cumulative pretax profit fell 96 percent year-on-year to NT$1.32 billion.
In 2020, the Kaohsiung-based company was on the brink of losing money due to COVID-19 pandemic shutdowns, but it eked out a profit of NT$886 million, or earnings per share of NT$0.05, for the year.
The company is facing an even more dire situation this year after steel demand sank suddenly in the second half of last year, Wong said in the letter.
The US-China trade standoff, ongoing Ukraine war and interest rate hikes by central banks have weakened the world economy, which led to a plunge in steel demand, he said.
“The situation this year is worse than the slump in 2020,” Wong said.
As the latest industrial downturn is driven by multiple and complicated factors, the company does not expect price cuts to be an effective way to stimulate demand, he said.
The business outlook is unpredictable as customers are trying to cope with gloomy demand, he said.
“China Steel is facing a double blow from shrinking shipments, and falling prices at home and abroad,” Wong said.
The company has registered marginal contributions from hot-rolled and cold-rolled steel products in Taiwan this year, Wong said.
In foreign markets, the company is struggling to make a profit due to competitive prices from Chinese rivals, he said.
About 47 percent of the company’s products were shipped to foreign markets in the first half of the year, with Europe and Southeast Asia the top two destinations, company data showed.
China Steel shares fell 2.3 percent to close at NT$25.45 yesterday, having plummeted 15.87 percent since the beginning of this year, underperforming the TAIEX, which advanced 14.67 percent over the period, Taiwan Stock Exchange data showed.
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