- Rising labour, logistics, raw material costs prompt further price hike
- Company to reduce volume of orders accepted to curb supply pressure
Mysteel Global: Nippon Steel has decided to add another JPY 5,000/tonne (t) ($31/t) to domestic prices of its H-beams for March contracts (April roll), the company announced on Wednesday, despite end-February stocks held by dealers surging by 7.5% from end-January to a recent record high.
The company had raised prices by the same amount last month for the current month’s production but argued that “labour costs, logistics costs and others, including prices of major raw materials, have continued to rise (and) further increases will be inevitable.” As a result, it had no choice but to continue passing on its higher costs, the company claimed.
Nippon Steel does not reveal its prices, but on Monday of this week, rival sections maker Tokyo Steel Manufacturing, Japan’s largest independent mini-mill, had announced it was lifting prices of several long products, including H-beams and I-beams, by JPY 5,000/t ($31/t) for April shipment. This lifted its price for large 100×100 mm H-beams to JPY 108,000/t ($682/t).
A trend seems to be emerging, with Yamato Steel – a mini-mill located in western Japan – announcing on Tuesday that it would be raising the selling price of its H-beams in April by JPY 2,000/t ($13/t), also arguing that for the new fiscal year starting 1 April, “costs will continue to rise, such as electricity bills, and the company’s profitability is also deteriorating.” The Himeji-based sections maker had raised prices by JPY 3,000/t ($19/t) last month, making for a two-month increase of JPY 5,000/t ($31/t), Mysteel Global notes.
In its statement on Wednesday, Nippon Steel stated that it felt compelled to push for a further increase for next month to offset its rising costs, but its decision was unorthodox, nonetheless. This is because on the same day, the company also revealed the volume of H-beam stocks held by its Tokiwakai grouping of domestic H-beam traders and dealers nationwide, which by end-February had totalled 224,000 t, the highest since May 2019’s level of 226,700 t. The total was higher by 15,600 t from end-January and by 13,500 t from end-February last year.
“It is the worst level,” the company admitted candidly. The volumes of beams entering the dealers’ yards in February jumped by 5,000 t from January, while the volume leaving was actually lower by 800 t m-o-m, the data show. Given that stocks are rising, justifying a further price increase to its customers will be a difficult task.
“Commercial inventories remain at high levels, and some buyers are refraining from restocking, even as prices are rising,” the company ruefully observed.
To gain some leverage in negotiations and hopefully tighten supply, Nippon Steel said that during April, it will reduce the volume of beam orders it accepts from dealers by 50% compared with the actual number it received in March, making for the third consecutive month that it has reduced the number of orders accepted.
The effect of the reductions is expected to “finally take effect after this month,” the company said. Usually, demand enters a period of recovery from March, it explained, “so we expect an improvement in the supply-demand balance.”
Note: This article has been published in accordance with a content exchange agreement between Mysteel Global and BigMint.
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