Japan Rebar Makers Should Seek Electricity Cost Reflection, Kyoei Steel

Kyoei Steel’s chairman Hideichiro Takashima told to reporter of Japan Metal Bulletin domestic demand for concrete reinforcing steel bar would increase by 3% to 8.2 million tonnes in fiscal 2012 starting in April while more than 40% of the demand would be located around Tokyo and in Tohoku area. Rebar makers in Central and West Japan, including Kyoei Steel, should continue cautious output control along the demand level, suggested Mr. Takashima. Meanwhile, Japanese electric furnace steel makers are concerned on production cost expansion for electricity, ferrous scrap and substantial materials. Mr. Takashima indicated new scheme for sustainable rebar price and necessity to restructure domestic rebar producers more. Kyoei Steel is Japanese top rebar supplier headed in Osaka.

Mr. Takashima explained domestic rebar demand is estimated to increase by 3% to around 7.9 million tonnes in fiscal 2011. The demand recovered in the second half year especially for condominium construction and large construction projects around Tokyo and Osaka. The demand is expected to keep slight increase in fiscal 2012 while he analyzed, more than 40% of the demand would generate in East Japan.

As for production costs, Mr. Takashima explained Kyoei Steel’s affiliate Kanto Steel in Ibaraki would be impacted by electricity charge increase if TEPCO implements the charge hike in April. KEPCO hasn’t revealed intention to raise electricity charge around Osaka but he suggested KEPCO would also launch the hike due to suspension of atomic power plants. He complained this is the critical situation for Japanese electric furnace steel industry.

Mr. Takashima said ferrous scrap price is also likely to rise since electric furnace steel makers would increase the procurement volume while Japanese scrap dealers might increase export under weak yen trend. Other costs are also increasing for energy and substantial materials, he explained.

Mr. Takashima emphasized rebar makers should achieve sustainable price level, for example, establishing new price scheme to reflect electricity cost upsurge more flexibly and sensitively. Meanwhile, he pointed out Japanese rebar industry has optimized only several rolling lines in recent 20 years. Mr. Takashima indicated rebar makers’ integration should progress more and Kyoei Steel would strengthen its competitiveness to become a core company of the makers’ restructuring.