Asia steel falls as global auto sales hit slump

NIPPON Steel Corp, the world's No. 2 mill, and Baoshan Iron & Steel Co led a decline in Asian mills yesterday on concern demand from auto makers and builders will drop amid a global credit crunch and economic slowdown.

Nippon Steel plunged 7.8 percent to close at 319 yen (US$3.08) on the Tokyo Stock Exchange. Baoshan Steel, China's biggest, dropped 8.8 percent to close at 6.63 yuan in Shanghai and South Korea's Posco plunged 7.7 percent, Bloomberg News reported.

The MSCI Asia Pacific Index headed for its lowest close since 2005 as the global credit crisis deepened in Europe and the United States lost the most jobs in five years. US auto sales last month had their biggest decline in 17 years, and Chinese mills cut prices and output on slowing domestic demand.

"There are too many negative factors and not enough positive ones affecting steel makers," Kim Hyun Tae, an analyst at Hyundai Securities Co, said. "Slowing growth will mean less demand for cars and other products that use steel. Another concern is the drop in steel product prices led by China."

Benchmark Chinese steel prices have dropped 18 percent to 4,863 yuan (US$710) a metric ton from a June 5 record. Hebei Iron & Steel Group, Shougang Corp and two other steel makers in northern China will cut output by 20 percent this month due to weak demand, the China Securities Journal reported.

"The global financial crisis and the slowing economy have had an impact on the property and automobile industries, sending steel prices down faster than raw material costs," said Zhou Xizeng, chief analyst with CITIC Securities Co.

Tata Steel Ltd, India's largest producer, declined as much as 9.5 percent to 355.6 rupees (US$7.53) and was the fifth-worst performer on the Sensitive Index this year. The stock lost 41 percent of its value last quarter, the most since the three months ended in December 1992.

Angang Steel Co, China's No. 2 steel maker, dropped by the 10 percent daily limit to close at 7.92 yuan in Shenzhen trading. Wuhan Iron & Steel Co also fell by the limit to 6.78 yuan in Shanghai.