Nisshin Steel Mulls Zinc Surcharge Price Mechanism

Nisshin Steel entered into final study to introduce zinc surcharge price mechanism for all galvanizing steel items including colored galvanizing steel and galvalume steel to cover surging zinc ingot price. The firm will finalize the mechanism informing to distributors and users. The surcharge mechanism is to reflect change of domestic zinc ingot official price to price of galvanizing steel products. Nisshin Steel’s attempt is new in the broad coverage for all galvanizing steel items though Yodogawa Steel Works and JFE Galvanizing & Coating started new zinc extra system only for hot-dip galvanizing steel for January shipment. Nisshin Steel’s galvanizing steel items represent near half of the sales and the new mechanism has heavy impact on the results. Zinc ingot price started to surge since summer of 2005. The price hit record US$ 4,619 per tonne at London Metal Exchange. The monthly averaged LME zinc price increased to 2.4 times at US$ 4,405 per in December from US$ 1,298 in August 2005. Nisshin Steel tries to cover the higher cost price through 10,000 yen per tonne hike both in July and October shipment. However, the firm couldn’t cover the extra higher zinc cost. The firm cannot secure profit when domestic official zinc ingot price is more than 500,000 yen per tonne even after the total 20,000 yen of price hike. The firm decided to introduce new surcharge mechanism after the study including similar system in USA. The firm tries to start the new system as early as possible after the conclusion of the study including base zinc price for the surcharge.