Japan Steels Iron Ore, Coking Coal Price Talk Delays

Price negotiations haven’t started for iron ore and coking coal shipped in fiscal 2009 starting April between Japanese integrated steel makers and offshore suppliers. The actual start of the negotiations may be postponed to 2009, though Japanese integrated steels and offshore suppliers pre-talk and enter the full-scale negotiations in December of usual years. They haven’t started pre-talk yet this year. Integrated steels cannot estimate steel product demand and output plan for fiscal 2009 while material producers are unable to forecast iron ore and coal demand when steel makers widen output reductions.

Japanese integrated steels will start output reductions of wide range in and after January 2009. A source of Japanese integrated steel maker said they may implement additional production cut during January-March. Steel makers cannot forecast steel product demand after April and cannot draw out their output plans for fiscal 2009.

Japanese major integrated steels currently hold almost full inventories for iron ore and coking coal at their yards, the stock capacity of those which is above 1 month. They are adjusting the material procurement by delaying shipping deliveries. Iron ore stocks maintain the high level at Chinese quays. Iron ore producers such as Vale of Brazil are decreasing the output. A Japanese concerned source said coal supply may need to be reduced soon.

Supply and demand balances are loosing for iron ore and material coal. One-year contract prices are expected to lower in fiscal 2009. In fiscal 2008, iron ore price doubled and strong caking coal price tripled from fiscal 2007 at maximum. However, current iron ore spot price plunged down to one-third of the first half of fiscal 2008. Integrated steels expect the price down for fiscal 2009.