Raw materials prices for steel making rises in Japan
Nikkei reported that prices of raw materials for steelmaking are on the rise, with the steel scrap used in electric furnaces trading 25% higher than the start of the year in Japan, and the coking coal used in blast furnaces 20% more expensive than the October low. Global demand for steel is robust, including in Japan, where the redevelopment of Tokyo continues apace, and in Southeast Asia.
Steel scrap procured by electric furnace steelmakers in the Kanto region now costs around 34,500 yen (USD 308) a tonne for the benchmark product a level not seen in three years and 10 months. In the past month alone, the price has jumped 11%, reflecting increased domestic demand as well as the situation in foreign markets. According to one Japanese steel-trading company, steel scrap usage by electric furnaces is 10% higher than a half year ago.
Industry figures show 39 million tonnes of steel scrap supplied in Japan in fiscal 2015 with 8 million tonnes exported, a dynamic where the international market greatly influences domestic conditions. Mr Takayoshi Meiga, chairman of the Non-integrated Steel Producers' Association said that "There is a voracious demand for steel scrap, particularly in Southeast Asia, so we don't expect prices to drop.”
The growing costs have prompted Japanese electric-furnace steelmakers to begin taking steps to boost their prices. Tokyo Steel Manufacturing will lift its prices by 3,000 yen a tonne for all products, beginning with the December contracts, and similar moves have been announced by flat-steel makers Oji Steel and Shinkansai Steel.
The price of coking coal used by blast furnaces is also on the increase. The spot market price for Australian coking coal has soared nearly 20% over the past month to around USD 210 a tonne. One reason is because China now relies on imports, noted Nomura Securities economist Eli Owaki.
But supply-side factors also play a part. Some coal mines in Australia are experiencing poor production, so ships are congesting the harbors waiting to be loaded, explained a source from one trading company.
Meanwhile, iron ore is trading at around USD 67 a tonne on the spot market, moving at its highest level in 10 weeks.
With raw material costs swelling, prices for steel products seem destined to climb both in Japan and elsewhere. Companies on the secondary market reportedly have begun voicing plans for another round of price hikes during December.
Source : Nikkei