Japan Major Steels’ Cost Rises by 15,000 yen/t in April-June

Japanese integrated steel makers’ raw materials cost should increase by 15,000 yen per tonne for April-June from January-March when the makers are concluding price negotiation to increase the raw materials price to record high level. The price increases by 50% for coking coal and by 25% for iron ore. The cost increase including higher cost for other raw materials and fuel would be more than 300 billion yen or more than 15,000 yen per tonne of steel products for Japanese integrated steel makers in April-June from January-March while they are still under negotiation with some miners. The makers already announced 20,000 yen of steel price hike in and after April to cover higher raw materials cost including cost for fiscal 2010 ending March 2011. The steel makers start full scale negotiation to realize the price hike in April.

Japanese integrated steel makers failed to settle the hard coking coal price with BHP Billiton Mitsubishi Alliance (BMA) when BMA seeks monthly based pricing. The steel makers already agreed with other miners to increase the premium coal price by US$ 105 to FOB US$ 330 per tonne for April-June from January-March. The price increases for 2 quarters in a row and exceeds former record of annual contract price in fiscal 2008 when the supply gets very tight due to Australian heavy rain damage.

Japanese steel makers started to settle the soft coking coal price at US$ 260 per tonne with plus minus US$ 5 range for April-June compared with US$ 180 for January-March. An integrated steel source said the soft coking coal price was settled for around 70% in the volume. They also started to settle pulverized coal injection coal price at US$ 275 compared with US$ 180 per tonne in January-March. The source said the price negotiation finished for more than 50% for total iron making coal volume.

The steel makers’ iron ore purchase price increases by US$ 34 to FOB US$ 171 per tonne for Australian fine ore for April-June from January-March. The price increase trend is settled while they are still talking for some grades and brands.

Japanese integrated steel makers’ raw materials and energy cost will increase by more than 300 billion yen for April-June from January-March while some items are still to be settled. An integrated steel source said the cost up should be more than 15,000 yen per tonne for steel products when Japanese steel makers supply quarterly 20 million tonnes of steel products. They try to pass the higher cost by 20,000 yen per tonne of steel price hike to cover higher cost for April-June and past cost increase when they couldn’t recover all of the higher cost for raw materials and extra charge in procurement of alternative coal to unshipped coal from heavy rain damaged Australian source in fiscal 2010.