Loss Making Japan Electric Furnace Carbon Steel Makers

Japanese electric furnace carbon steel makers could post monthly loss in the start of new fiscal 2010 starting April due to slow construction demand and higher ferrous scrap cost. The steel shipping price keeps deceasing while the scrap cost increased by 9,000-10,000 yen per tonne since the beginning of the year. A source in major concrete reinforcing steel bar maker said many of the makers post several hundreds millions yen of loss for rebar. The makers announced the price hike but the market could take time to accept the higher price. The makers could suffer the narrower margin.

Rebar makers’ shipping price is around 50,000 yen per tonne around Tokyo while some makers’ shipping price is less than that. The scrap cost is increasing from current 34,000-35,000 yen. Many of the makers post monthly loss since the beginning of the year when they need normally 30,000-35,000 yen per tonne of margin. The loss is expected to increase more in April while the shipping price could rebound in April.

The makers announced the selling price hike recently. The rebar makers try to realize 60,000 yen per tonne of the selling price through 5,000 yen hike each in February and March. The H-beam makers including integrated steel makers target 70,000 yen of selling price. The market price started to increase but the level is 54,000 yen for rebar and 64,000 yen for H-beam around Tokyo.

The electric furnace carbon steel makers’ operation is around half of the normal level when the construction demand is low level both for building and civil works. Under the major production cut, the several hundreds million yen fixed cost weight increases. They try to reduce the cost in companywide effort but the cost couldn’t decrease widely. They focus on the price hike effort when many observers expect they should post loss for the first half of fiscal 2010 and without price hike, many of them would post loss for the full year.