JFE Steel to Hike Export Price by US$ 50-100/t for Jan-Mar

JFE Steel increases steel selling price by 3,000-5,000 yen per tonne in January-March from October-December, said executive vice president Tsutomu Yajima at press conference on Friday. The firm increases the export price by US$ 50-100 per tonne. The firm decided the price hike when the iron ore and coking coal cost increases by around 7-8% and the steel price increase was less than cost up in first half of fiscal 2010 started in April while the firm cannot absorb the cost only by own effort.

The firm offers the price hike to contract users including automakers and shipbuilders at the half year price negotiation. The firm already started the negotiation with part of the users. The price increase depends on the negotiation and the price could be flat for October-December and apply only to January-March while the price would be applied to averaged price in the period.

Mr. Yajima said the domestic market is very severe when the activity is very slow for construction and the manufacturers, especially exporters are suffered from higher yen rate. However, he emphasized the steel price increase was for extremely higher raw materials cost while the firm tries to shorten the steel pricing period in the year to reflect shorter period of raw materials cost change. He expects the users understand the steel maker’s situation to accept higher steel price when the steel maker tries to minimize the price hike through the own effort.

Mr. Yajima said offshore steel demand is still strong and the supply balance should result in better market price in January-March. He said the target price is US$ 750 per tonne for hot rolled coil through the price hike by US$ 50-100 depending on the items for January-March. He expects the price hike enables to cover higher cost and yen rate under better supply balance despite of the uncertainty. He tries to seek understanding of the situation by the users despite of the potential resistance.

Fine iron ore cost is expected to increase by US$ 10 to US$ 137 per tonne for January-March from October-December based on index in September-November. Coking coal miners seek 7-8% higher price to steel makers and the negotiation will be concluded soon. JFE Steel expects the raw materials cost will increase in the second half of fiscal 2010 from the first half despite of the lower cost in October-December from July-September.

However, the steel buyers should resist the attempt. The domestic largest buyers of automakers are suffered from slower domestic automobile sales in and after October due to termination for eco-friendly car purchase subsidiary in September while the automobile export also gets slower under higher yen rate. The automakers also try to reduce the cost including procurement cost to improve the cost competitiveness when the world users seek more compact car with lower cost. The automakers try to use more offshore steel and parts. Japanese shipbuilders try to reduce steel purchase cost to improve the cost competitiveness with offshore rivals under higher yen rate.

The users expect the lower steel price when domestic market price is still low level. Another negative factor is overcapacity when South Korean makers including Hyundai Steel and POSCO and Chinese makers expand the output capacity and production level.

JFE Steel expects the price hike negotiation will be concluded in the month. However, the negotiation could be longer with severe resistance from the buyers.