Japan Construction Steel Price to Rebound, Industry Official

Japanese steel price shows sign to rebound after the price hit bottom when ferrous scrap market price rebounds. Domestic electric furnace steel makers try to increase the selling price to improve the profitability. Hideichiro Takashima, who is chairman of Kyoei Steel, expects the makers have chance to improve the selling price level in autumn when the demand increases.

Mr. Takashima expects domestic demand will improve in autumn more than recent years. He expects construction steel order will increase when the projects resume the activity after temporarily stop and deferment due to the major earthquake. He said construction demand increases for storm surge barriers around nuclear power plants. He expects rebuilding activity around damaged areas by the quake will increase the steel demand.

Mr. Takashima said concrete reinforcing steel bar demand will increase in second half of fiscal 2011 ending March 2012 from the first half. He expects general contractors will increase the purchase volume in October when they hold the orders. He said the higher demand supports rebar makers’ price improvement.

Mr. Takashima said Kyoei Steel tries to realize more than 65,000 yen per tonne of rebar price now while the market price is just more than 60,000 yen around Osaka. He recognizes the market price has improved around Osaka when the dealers are reluctant to get order at less than 60,000 yen. He said Kyoei Steel managed to secure recurring profit in April-June but the profitability is severer in July-September due to around 3,000 yen per tonne of recent scrap price increase. He decided to secure annual profit for fiscal 2011 after the firm posted loss in fiscal 2010.

Mr. Takashima sees price gap between pig iron and scrap will get narrower while now the gap is wide exceptionally. He expects scrap market increases toward 40,000 yen per tonne level when domestic integrated steel makers increase the scrap consumption to meet higher demand for automakers and manufacturers. He said Kyoei Steel tries to secure margin by increasing the steel selling price along with scrap price increase. He expects the move could be accepted by the market.

Mr. Takashima said Kyoei Steel stops the production for 35 days through September 20 at Hirakata plant in Osaka resulting in major production cut in August and September. The outage is to renew old facilities and to improve the operation process. He said other plants in Yamaguchi, Nagoya and Kanto Steel also reduce the production to the demand level.

Mr. Takashima said domestic rebar production is monthly 600,000-700,000 tonnes compared with 1.44 million tonnes of peak in March 1991 when domestic construction investment decreased from 80 trillion yen to 40 trillion yen. He emphasized domestic makers continues effort to reduce cost by operating only in night time and weekend while the industry has important roll to recycle scrap. He said power company should be careful on electricity price hike when higher cost could damage on the steel industry.

Mr. Takashima said Japanese electric furnace steel industry’s business condition gets severer under shrinking construction demand and higher import. He expects Japanese steel industry should experienced consolidation and reshuffle to survive. He said Kyoei Steel also could find chance for merger and consolidation.