JFE raises coil prices for May

"We are aware that the demand environment is in a difficult situation, but we will bring the value of steel back to an appropriate level throughout the steel supply chain," a company official said on Thursday, citing as well "the influx of cheap imported materials," industry daily, Tekko Shimbun, quotes him as saying. The increase applies to hot-rolled, cold-rolled and surface-treated sheets and coils for domestic sale from May shipments (for March contract and April roll), the daily added.

The increase, JFE's first in two years, is targeting distributors, coil centers and small processors such as ERW pipe makers and re-rollers, with prices seen rising between 5% and 10% depending on product.

Excluded from the increase are JFE's sales to long-term contract buyers such as auto-manufacturers and makers of electric appliances, which account for a far larger portion of the integrated mill's sales. However, as Thursday's announcement was top news in all major industry dailies, JFE was clearly sending a message that contract customers should expect tough negotiations in upcoming quarterly and half-yearly supply talks, Mysteel Global notes.

JFE argued that "as a manufacturer", the price increase was necessary in order to encourage coil centers and distributors to pass on the higher prices to their end-users and ensure that each company involved in the distribution of steel products can secure a level of profitability that can be reproduced. JFE hopes that distributors and other retailers "explain its policy carefully to customers and proceed to obtain their understanding", it said.

The wild fluctuation in the USD-Yen exchange rate in the recent past has certainly impacted the Japanese steelmakers whose crucial raw material inputs are all denominated in US dollars. Six months ago on October 2 last year, the Japanese mills were paying just Yen 147 for every dollar's worth of imported iron ore and coking coal they bought, whereas on March 6 they were paying Yen 157.5.

Indeed, for iron ore, for example, the 7% increase in yen terms for those imports was only partly offset by the drop in ore prices during the same period. According to Mysteel's assessment, the average daily seaborne price for 62% Australian fines dropped by 4.1% from $104.85/dmt last October to an average of $100.58/dmt during February.

But JFE's argument blaming surging volumes of imports of the three flat-rolled types doesn't withstand the same scrutiny, as Customs statistics show that volumes of the three items from the Japanese mills' usual adversaries – China, Taiwan and South Korea – have seen the volumes generally decrease.

Japan's imports of key carbon steel sheets & coils

Source: Ministry of Finance

Unit: Tonnes

Written by Russ McCulloch, russ.mcculloch@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com