AK Steel Holding Corporation, United States Steel Corporation May Benefit from Tokyo Steel’s Bar Price Hike

23 March 2016

Today, Tokyo Steel Manufacturing showed its intention to revise its April delivery prices by 5% against construction-used steel bars. The company is likely to increase the prices by $17.90 (2,000 yen) to $393.81 (44,000 yen) per ton.

This will be the first price hike since January 2014. Increased supply pressure pushed the company to cut its price offerings overtime. Current decision is an indication that the market might have reached the oversupply clearance position.

Previously, the price change decision was taken on February 22, 2016, where the company slashed its March delivery prices by around 14%. The decision was taken to compete against cheaper imports amid a firm yen and slow domestic demand. It reduced the prices in $26.85-$62.65 (3000-7000 yen) per ton range.

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Korea-based POSCO (ADR) (NYSE:PKX), Hyundai Steel Co, and China-based Baosteel Group Corporation keep a close track of Tokyo steel’s price movement, since they are amongst biggest importers of Japan.

It is pertinent to note that in the current decision, only steel bar prices have surged. The prices for H-shaped beams, which are consumed in construction, and other products that include hot-rolled coils and heavy plates remain unaffected in April.

Tokyo Steel's Managing Director Kiyoshi Imamura said in his statement: "We believe the domestic steel market has hit a floor following a sharp rebound in overseas prices, led by price hikes by Chinese mills." He added: "We expect an upward trend in steel prices to continue as domestic demand for construction materials is solid and inventory for that steel is low."

Imamura remained optimistic towards increased domestic demand. He is of the view that summer onwards, the new national stadium project for the 2020 Summer Olympic Games and other Olympic-related works will boost iron and steel domestic demand. The stadium’s construction work is expected to start in 2017 and complete by November 2019.

 

The production in Japan remained dull during February 2016. According to the data released by the Japan Iron and Steel Federation (JISF), the pig iron production during the month remained 6,433 thousand metric tons, down 6.6% month-over-month (MoM) as compared to 6,887.5 thousand metric tons it produced in January 2016. The year-to-date (YTD) total production trimmed 0.6% as compared to the same period last year.

Likewise, the crude steel production during February 2016 was 8,354.9 thousand metric tons, down 4.81% MoM in comparison to 8,776.7 thousand metric tons produced in January 2016. The YTD total production declined 1.9% as compared to the same two months last year.

This was not the first month of production decline as the country is facing output drop for the past 18 months. The decline was mainly attributed to lower demand from auto manufacturing sector, lower export prices, and lack of government efforts to reignite growth to end decades of deflation.

YTD iron ore prices moved in the $39.51-$63.74 per ton range, reflecting 61% spread. The iron ore prices on January 4, 2016 were $44.37 per ton, which surged 32% to reach $58.36 per ton on the closing of March 22, 2016. The increased prices in the iron ore is the indication that demand is gradually emerging.
What is in it for US Steel Manufacturers?

The US Steel industry was depressed in CY15 due to low-cost steel imports from other countries. However, after couple of petitions placed by AK Steel Holding Corporation (NYSE:AKS), ArcelorMittal SA (ADR) (NYSE:MT), Nucor Corporation (NYSE:NUE), SSAB Enterprises, LLC, Steel Dynamics, Inc. (NASDAQ:STLD), and United States Steel Corporation (NYSE:X), the US Department of Commerce took immediate step. In this regard, certain importers and producers were imposed with different dumping duties upon the affirmative preliminary determinations.

The regulatory authority have so far announced antidumping in three different cases. This announcement brought a sigh of relief in the domestic industry. The steel demand also diverted towards them. Taking advantage of it, the producers increased per ton prices by around $30 on certain steel products.

On the other hand, China’s largest steel producing province Heibei also announced Steel production cut. In this regard, the province is expected to reduce steel production by 8 million tons in CY16. It also aims to reduce iron ore production by 10 million tons. Such step was taken to take China out of economic slowdown amid steel supply glut.

However, at this point, the market pundits started speculating that importers might feel a charm again, since their offerings are lower than current market prices. Nevertheless, the recent price increment decisions from different steel producers globally have started diluting the speculative threat gradually. Additionally, a situation might incur where the domestic producers find themselves in a position to bid for Tokyo 2020 Olympic stadium.

 

Source : businessfinancenews.com