Tokyo Steel Manufacturing keeps product prices unchanged owing to weak domestic demand

19 May 2015

Tokyo Steel Manufacturing Co , Japan’s top electric arc furnace steelmaker, said on Monday it would keep product prices unchanged for the seventh month in June, further evidence of weak demand at home and oversupply elsewhere in Asia.

The company’s pricing strategy is closely watched by Asian rivals such as Posco, Hyundai Steel Co and Baosteel, which want to boost exports to Japan.

“There are still excess inventories of flat-rolled products in Japan,” Tokyo Steel’s managing director, Kiyoshi Imamura, told reporters.

“But we expect supply and demand will be gradually balanced as steelmakers are trimming output and construction demand is expected to pick up after the summer as companies are increasing spending on domestic manufacturing facilities,” he said.

Faced with higher inventories and tumbling export prices, Japan’s top steelmaker, Nippon Steel & Sumitomo Metal, is cutting crude steel output by 9 percent in April-June from the previous quarter, its sharpest reduction since January-March 2009 at the time of the global financial crisis.

Second-ranked JFE Holdings Inc is cutting its production by 4-5 percent for the quarter.

The industry ministry has forecast that Japan’s crude steel output will fall 4.9 percent in April-June from the previous quarter to the lowest level for the quarter in six years.
Tokyo Steel’s Imamura said the export market looked bearish.

Export prices of hot-rolled coils have fallen to $410-460 per tonne, with H-beam prices dipping to $520-540, far below domestic prices of 63,000 yen ($527) and 77,000 yen ($644) respectively.

“Under these prices, we won’t boost exports,” he said.

Asian steel prices have come under pressure as China’s steel exports surged 32.7 percent in the first four months to 34.31 million tonnes due to a slowdown in its domestic demand and a prolonged fall in raw material costs.

Nippon Steel’s executive vice-president, Katsuhiko Ota, told Reuters last week that its export margins had been hit as export prices for its hot-rolled coils, for example, had fallen $150 per tonne between December and March.

Nippon Steel, which exported 47 percent of its products in the year that ended in March, had no plans to step up exports for now, he said.
The depressed export market could delay a recovery in Japanese steelmakers’ output.

“Domestic demand may gradually pick up but depressed overseas prices will likely cap their exports and weigh on their output and earnings,” said UBS senior analyst Atsushi Yamaguchi.