Flat Japan Rebar Demand in F2011, Kyoei Steel

Kyoei Steel’s chairman Hideichiro Takashima expects Japanese demand of concrete reinforcing steel bar is around 7.4-7.5 million tonnes in fiscal 2010 ending March 2011 while Non-Integrated Steel Producers’ Association estimated as of July 2010 the demand will decrease by 3.8% to 7.12 million tonnes in fiscal 2010 from fiscal 2009. He said the demand in fiscal 2011 is in line with fiscal 2010 level and the demand couldn’t show major recovery.

Construction steel price increases in the month. However, electric furnace steel makers’ profitability is still severe due to higher raw materials cost. Mr. Takashima said the price increased in early 2010 but turned into decrease in May and June. He said the price decreased sharply since November and many rebar markers should post monthly loss for most of the months in 2010 under lower level of selling price and some industry watchers estimate rebar makers posted loss for 11 months in the year. He said Kyoei Steel also experienced loss making months with several black ink months. He said the firm tries to improve the profitability in 2011.

Higher ferrous scrap cost squeezes the makers’ profitability since October 2010. Mr. Takashima said the scrap price keeps increasing recently and the higher scrap cost increases the makers’ loss to significant level. He expects the scrap price could increase widely at least for immediate 3 months under growing demand in Asia when cost of iron making raw materials should increase widely due to bad weather in Australia and Brazil. He said the scrap price could reach 50,000 yen per tonne level compared with current 40,000 yen level. He said the firm tries to increase the steel selling price level since November for better profitability and eyes another price hikes depending on the market condition.