Nippon Steel & Sumitomo Metal Corp said on Tuesday it will seek an almost 20 percent price rise on the products it sells to Japanese manufacturers between April and September, to pass on higher material costs due to the yen's fall.
Executive Vice President Shinya Higuchi told reporters the company, the world's second-biggest steelmaker in terms of crude steel output, aims to ask large-lot steel buyers such as automakers, shipbuilders and electronics manufacturers to accept an increase of at least 15,000 yen ($150) per tonne.
“The cost of importing raw materials in yen has risen because of the yen's sharp fall. We need to ask our clients to shoulder that increase,” he said.
Higuchi did not specify which product prices, but the 15,000 yen increase would represent a 19 percent hike from 78,000 yen per tonne, the company's average prices for the October to March period.
The yen has fallen about 20 percent since November last year, a month before Prime Minister Shinzo Abe swept to power and unleashed fiscal and monetary stimulus to try to kick-start the country's sluggish growth.
Nippon Steel has said its margin have been squeezed in recent years as the company could not pass on higher raw material costs due to a strong yen pressuring the earnings of Japanese exporters.
Now the steelmaker is betting automakers and other manufacturers can accept taking on some of the higher costs for Nippon Steel due to their improved earnings outlook.
Toyota Motor Corp, one of Nippon Steel's key clients, is forecasting a 36 percent gain in operating profit in the fiscal year that ends March 2014, powered by higher export margins as a result of the weaker yen.
“Automakers especially are benefiting from the lower yen and recovering demand in China,” Higuchi said.
Japanese shipbuilders are also gaining some new orders, he added.
The weaker yen makes Japanese exports of manufactured good more attractive to overseas buyers.
Negotiations between steelmakers and major domestic manufacturers take place every six months, but Japan's steelmakers typically fix contracts for iron ore and coking coal supplies on a three month basis, so talks with their customers often extend well into the supply period. The talks for the April to September period may be concluded later this month.
Steel demand in Japan has been stronger than expected, helped by higher demand from automakers and shipbuilders, Higuchi said.
Nippon Steel, which competes against South Korea's POSCO , has said it expects crude steel output of 11.30 million tonnes for the April to June period on a parent basis, up from 11.05 million tonnes in the previous quarter.
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