Purchase Integration Advances for Steel Sheet in Japan

The purchase integration is advancing for steel sheet by large contract users in Japan. The shipment rate that Japanese coil centers process for the consumers and other dealers reached to 54.1% in June, according Japan Coil Center Industry Association. The consignment processing ratio is increasing every month after the ratio exceeded 50% for the first time in March 2005. Large contract users are seeking the stable supply of steel sheet. Coil center source said that the coil centers became to cost centers in steel sheet distribution.

The purchase integration seemed to start in autumn 2004 when steel products supply became shorter in Japan. Japanese integrated steel makers could not meet users’ demand for output expansion, mainly from automobile makers, when steel demand rapidly grew up in East Asia, mainly in China. The large contract users advanced the purchase integration consequently to procure steel products stably. The users could procure steels at lower prices by the purchase integration than purchasing from market dealers. Market source additionally pointed out Japanese integrated steels aimed to hold their large contract users before the output expansion.

Steel sheet dealers are suffered from the market shrinkage due to the purchase integration. Coil centers might lose their management independence with more processing on consignment than processing for their own. Coil centers and steel sheet dealers are facing such changes of the market structure when the purchase integration is expected to advance more in the future.