Japan’s electric arc furnace (EAF) steel manufacturers’ profit margins have declined in H1CY2022 due to soaring electricity costs. Electricity costs have risen majorly because of surging fuel (natural gas and coal) prices against the backdrop of Russia’s invasion of Ukraine. The increase in fuel import prices in H1 started reflecting in electricity prices in H2.
The electricity costs have increased as a result of an adjustment of costs of fuel such as crude oil, LNG, and coal. The fuel cost adjustment upped by JPY 2 per kilowatt hour between April-June 2022, as per TEPCO Energy Partner. Prices are expected to rise sharply to JPY 9.26 per kilowatt hour in November. Thus, electricity costs required to produce per tonne of steel are also expected to jump to JPY 10,000 ($68) levels in H2, almost double compared to H1.
Considering rising power costs, rebars manufacturers see no option but to pass it on to the selling price. Rebar manufacturers in the Kanto region had hiked prices to JPY 1,20,000/t ($815/t) in April 2022 amid an increase in scrap prices. Since then, prices have been at these levels. With scrap prices remaining high and an expected increase in electricity prices in H2, it is likely that rebar manufacturers may raise product prices to JPY 1,30,000/t, a source said.
Note: This article has been written in accordance with an article exchange agreement between Japan Metal Daily and SteelMint.
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