Japan Steels to Cut Sheet Price by 15,000 yen/t for Electric Machine Makers

Japanese integrated steel makers apparently started to agree with heavy electric machinery and appliances makers to reduce the annual contract flat steel price by 15,000 yen per tonne for fiscal 2009 started April. They are concluding the negotiation after the steel makers reached agreement with Rio Tinto to reduce the iron ore price by around 33%. The steel makers already agreed with around 70% of the users, according to sources.

The users try to improve the profitability when Hitachi posted 787.3 billion yen of net loss, Toshiba posted 343.5 billion yen of net loss, Panasonic posted 378.9 billion yen of net loss and Sony posted 98.9 billion yen of net loss for fiscal 2008. The users sought the steel makers to reduce the flat steel price by around 30,000 yen per tonne for fiscal 2009 to reduce the cost to fiscal 2007 level in order to improve the cost.

However, the steel makers failed to reduce the iron making raw material cost for fiscal 2009 to fiscal 2007 level while the cost decreased by 57% for hard coking coal and by 33% for iron ore for fiscal 2009 from fiscal 2008. The steel makers are also in historical production cut in January-March and April-June due to very slow activity of users including heavy electric machinery, appliances and automobile. The steel makers are also in loss making operation.

The steel makers and users apparently reached agreement after they understand each position during the negotiation and the steel makers and Toyota Motor agreed to reduce the flat steel price by 15,000 yen per tonne for fiscal 2009.