Steel Sector Remains Mired
China's steel sector conditions remained challenging in June as both steel mills and traders reported a contraction in orders and a rise in stocks, Macquarie Group says in its June Chinese Steel Survey report. Raw material destocking at the mills continued but there were signs this was coming to an end, the report says. Profitability in the sector continued to look poor and cash margins for the larger mills were still very low, which was attributed to weaker steel prices.
City-Gate Gas Prices Hiked
The National Development and Reform Commission's 15% increase in city-gate gas price over the weekend is another big step towards liberalizing gas market and stimulating upstream gas production in China, CLSA says in its latest Asia Morning Line report. City-gate prices will be raised 0.26 yuan per cubic meters from 10 July 2013, and further increases are expected.
Tariff Hike No Impact on Gas Company Growth
The recent tariff hike in China's gas imports for non-residential use will have immaterial impact on demand, and gas distributors expect no problem passing on the cost, Morgan Stanley says in its latest China Gas Distribution report. The report lists the following reasons: Natural gas is still the second cheapest energy source after coal; and coal use is discouraged by the government. The report says the gas companies' customers have no choice but to accept the price hike as gas cost accounts for less than 10% of their total cost.
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