Japanese steelmakers to study offer prices for Q4 export talks

Tuesday, 10 Aug 2010
TEX reported that Japan's integrated steelmakers are expected to begin studying offer prices next week toward negotiations on their export deals of various steel products for shipments in the October to December 2010 quarter.

Until recently, their export negotiations centered on how to get a pass along in sales prices of steel products in a surge of raw materials prices. This time, however, there is a possibility that transaction prices of raw materials such as iron ore and coking coal will come down. As a result, it is likely that various customers for Japanese steel exports will react with a strong request for reduced prices whereby the Japanese steelmakers will focus their negotiations on how to fight back.

There is speculation that coking coal prices would change little on the whole in the October to December 2010 quarter. As to iron ore, spot prices are recovering again after a steep fall. But it is considered certain that the customers will put downward price pressure on new purchases of Japanese steel products on the argument that the raw materials prices are on the decline.

Transaction prices of iron ore and coking coal have advanced by nearly USD 300 per tonne until now, compared with what they were in the January to March quarter 2010. The Japanese steelmakers are thought to have won a pass along of USD 200 per tonne so far in negotiated prices of their steel exports. Therefore, they have yet to get another pass along of around USD 100 per tonne which they believe is necessary. Quite properly, they definitely want to execute price increase they need in negotiations on their steel exports in the October to December 2010 quarter as well.

Market prices of steel products in Asia, however, have fast falling since July, a situation where any price increase amounts to an empty dream. In fact, the Japanese steelmakers admit rejected price increases of many products in negotiations on their steel exports for July-September shipments. The negotiations are still continuing on price increases of some products, which indicate strong resistance to a price increase.

On their part, the Japanese steelmakers are determined to turn down a price reduction request in what they negotiate for Q4 export deals as to products whose price increases have been rejected in Q3 export deals. They look poised in principle to deny any price reduction because a sufficient pass through has yet to incorporate into sales prices of steel products as a whole.

Given the principle in point, it is understood that the Japanese steelmakers have a basic idea of maintaining the current prices as to most of the products for export in the October to December 2010 quarter. The question is, though, whether the basic idea will go through in actual negotiations.

It is likely that various customers will have no option but to take action for new purchases of steel products from Japan in the demand season in autumn as their stocks of bought in products are insufficient after they have taken a wait and see stance. Under ordinary circumstances, prices of steel products move up when users' purchases have perked up to replenish their steel stocks at a low level. But it is uncertain what will turn out this time.

In this connection, there are fears that market prices of steel products in Asia may continue to move along the bottom if China's steel exports go unabated despite the revisions of export duty rebates, market observers believe. China's July trade statistics are scheduled for an announcement next week, statistics that could become an advance indicator of Chinese steel exports.

(Sourced from TEX Report Limited)