Japan Steels to Seek 20,000 yen/t Term Price Hike, Quarterly Pricing

Japanese integrated steel makers started price hike negotiation with major contract users including makers of automobile, appliances and shipbuilding for fiscal 2010 starting April. The steel makers try to increase the price by 15,000-20,000 yen per tonne to cover higher raw materials when they agreed with miners to increase the coking coal price by 55% for April-June from annual fixed price for fiscal 2009. The steel makers also try to shift from annual fixed steel pricing to quarterly price as raw materials pricing.

Japanese steel makers are forced to accept wide cost increase for iron ore and coking coal for fiscal 2010. The cost could increase more in and after July. They couldn’t cover the cost increase through 15,000-20,000 yen per tonne of price hike. The steel makers try to hedge the cost change risk by reflecting the change on the steel selling price.

However, the steel buyers resist wide price hike and quarterly pricing when they are still trying to improve the profitability and reducing cost. The quarterly pricing could benefit new comers including domestic electric furnace steel makers and offshore steel makers for participating in the contract buyers’ market.

The quarterly pricing could be chance for Tokyo Steel Manufacturing to expand the presence in automotive steel market. The steel maker tries to expand the automotive steel sales through new launched Tahara plant but the annual fixed price was one of the hurdles for the company when the volatile ferrous scrap cost changes daily.