China Steel (2002) investor relations material

Steel and raw material dynamics

• Coking coal prices surged in early 2026 due to Australian supply disruptions, then eased before spiking again after Chinese mining accidents; iron ore prices fluctuated, declining mid-year but recovering on restocking and seasonal demand, though high inventories and new supply may cap gains.

• US steel prices hit a four-year high on tight supply and strong demand, with further increases possible; EU prices remain stable due to quotas and tariffs, while ASEAN markets see stabilization and modest demand recovery.

• In China, steel demand is expected to recover as real estate bottoms out and infrastructure investment rises, supported by government policies; Taiwan sees strong demand from technology and logistics sectors, with trade protection measures influencing import dynamics.

• EU quota cuts sharply reduced shipments, especially for electrical and coated steel, prompting a focus on high-value products and market diversification to offset lost volume.

• Global steel market fundamentals are stable, with rising tech and defense spending supporting demand, but geopolitical risks, energy costs, and trade barriers remain key concerns.

Operating performance

• Operating revenue for Jan–Jul 2026 rose 3% year-over-year to NT$197.7 billion, with operating income turning positive versus a loss in 2025; Q2 2026 saw improved margins and a return to profit after Q1 losses.

• H1 2026 standalone sales volume reached 3.74 million tons, with 58.55% domestic and 41.45% export; strong demand from AI and infrastructure projects drove domestic restocking.

• Consolidated H1 2026 revenues were flat year-over-year, but gross profit and net profit improved significantly, with net profit at NT$937 million versus a loss in 2025.

• Financial position remains robust, with diversified financing to mitigate rising interest rates; credit ratings are twAA- (Taiwan Ratings) and AA(twn) (Fitch), both with negative outlooks.

Key strategies

• Capacity optimization includes shutting down weaker lines and decommissioning the No. 1 blast furnace by Q1 2029, aiming for NT$1 billion in annual benefits and reduced costs and emissions.

• Advanced Premium Steel (APS) sales reached 390,000 tons in H1 2026, accounting for 11.5% of sales volume and over 90% of gross profits, with targets to increase APS proportion to 20.5% by 2031.

• Supply chain transformation focuses on green steel, smart manufacturing, and expanding into EV, drone, and robot industries, with significant progress in ultra-thin electrical steel and domestic powertrain supply chains.

• Green business initiatives include offshore wind and solar power, with wind farm availability and output improving and solar capacity expected to reach 120MW by 2033.

• Decarbonization targets a 25.3% emissions reduction by 2030, leveraging renewable energy, increased scrap use, and new technologies, with preferential carbon fee rates approved.