Daido Steel to Reduce Output under Higher Scrap Cost

Daido Steel will reduce the output by 10-15% or monthly 10,000-15,000 tonnes in April from now due to higher ferrous scrap price. H2 grade scrap price increased to 33,400 yen per tonne from 23,300 yen in September 2006 and the higher valued new cutting grade price increased to more than 40,000 yen from averaged 34,600 yen in February. The firm has trouble to secure scrap materials when Japanese export increases to South Korea under lower export from Russia. The firm said the less availability of scrap reduces the output from the high level. The firm tries to stabilize the supply of the products along with the inventory adjustment and scrap purchase reduction. The firm will reduce the output for all items and all buyers. The firm said the 1,000 yen per tonne of higher scrap price reduces annual 1.3 billion yen of lower profit. The firm is suffered from more than 5,000 yen per tonne of higher scrap cost for new cutting grade in a month and scrap purchase price increased by averaged 3,000 yen for all scrap grades in a year. The firm tries to improve the profitability by reducing the variable cost. The demand keeps high level mainly for automobile. However, the firm decided to reduce output to keep stable supply under less availability of scrap. The firm also tries to cool the scrap market through the output reduction by decreasing the operating rate mainly for day time and planned outage for rolling processes. The firm will decide the reduction volume through talk with users. The firm will reduce the output for a couple of months and could keep the reduction depending on the market condition. The firm reduced the output due to higher scrap cost in 2004.