Sheet Steel Price could Rise in Tokyo

Deadlocked sheet steel price could increase in Tokyo. The traders and distributors started to increase the reselling price when the inventory adjustment almost finished after the stock of hot, cold and coated sheet decreased to less than the normal level of 4 million tonnes at the end of October. The cold rolled sheet price is expected to increase in the start of 2007 after the plate price rebounded in November and December though some items are still in slump.

The sheet demand is firm mainly due to higher output of automobile. Domestic integrated steel makers revised the domestic automobile output estimate upward to 11.5 million units in the year compared with the 11.3 million units as of the summer. The steel makers operate the lines for automobile at full capacity.

The sheet demand also firm for industrial machinery while the demand started to improve for construction in autumn. A trading firm source said the demand is firm with more order from users since October.

Japanese import steel port inventory has kept less than 300,000 tonnes since March though the stock increased by 1,000 tonnes to 215,000 tonnes in October, according to Hanwa Co. The stock decreased to 195,000 tonnes in November. The import stock is much lower than more than 350,000 tonnes a year earlier.

The hot, cold and coated sheet inventory decreased finally to less than normal level of 4 million tonnes in October compared with the peak at 4.657 million tonnes in September 2005. The inventory adjustment took around 1 year long since integrated steels started to reduce the stock. However, a source in integrated steel said imbalanced stock held by makers, wholesale dealers and coil centers is getting better balance.

With firm demand and better inventory balance, trading firm and distributors started to increase the reselling price. Major trading firm including Hanwa and Sumikin Bussan announced the price hike for mid-sized plate products under balanced stock level. They realized around 2,000 yen per tonne of higher price in November and the price still keeps increase trend. Cold rolled sheet supply is expected to get tighter in early 2007 under lower import.

The sheet supply balance is getting tighter despite of negative factors including severe competition among distributors when major users increase the central purchase. The market price is likely to move upward after the increase of mid-sized plate.