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China Steel, Sinosteel in Alliance as Taiwan Market Slows

Aug. 8 (Bloomberg) -- China Steel Corp., Taiwan’s biggest maker of the metal, said it signed a strategic alliance agreement with Sinosteel Corp. as the Taiwanese market slowed.

The companies will strengthen cooperation in areas including production, trading, engineering and management, the Kaohsiung, southern Taiwan-based mill said in an e-mailed statement today, without giving financial details. Sinosteel, with headquarters in Beijing, is controlled by the Chinese government, according to its website.

“China Steel probably wants to expand in the China market through Sinosteel,” said Peter Tzeng, a Taipei-based analyst at Polaris Securities Co. “The Taiwan market is saturated, so the company must develop overseas markets,” said Tzeng, who has an “equalweight” rating on the stock.

Taiwan accounted for 67 percent of China Steel’s sales volume in July, down from 71 percent a year earlier, according to the company’s website. Taiwanese base metal producers cut output by 7.2 percent in June from the previous month, as “volatile” steel prices damped purchases, the Ministry of Economic Affairs said on July 25.

China Steel announced last month a 1.7 percent cut in domestic prices for September contracts, after a 4.2 percent decline for the July-to-August period.

Shares of China Steel fell 0.9 percent to close at NT$28.95 in Taipei trading. The stock has dropped 9.3 percent this year, compared with the 16 percent decline in the benchmark Taiex index.

To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net

To contact the editors responsible for this story: Andrew Hobbs at Ahobbs4@bloomberg.net.

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