Japan: Tokyo Steel sharply raise its steel prices by $97/t for Jan '21 deliveries

Japan's top electric-arc furnace - Tokyo Steel manufacturing co. has announced a steep hike in steel products by JPY 10,000/t ($97) for Jan '21 deliveries. Prior to this, the company had delayed the price announcement on the back of a steep increase in scrap prices and a lack of clarity in price trends.

• Rebar up by 16% to JPY 73,000/t ($706)
  
  
• H-shaped beams up by 12% to JPY 93,000 ($899)
  
  
• U-shaped steel sheet up by 11% to 1,05,000/t ($1,015)
  
  

Factors that attributed to the steep hike in prices:-

Increased domestic consumption- With the increase in the construction sector activities in the domestic market and improved demand from the automotive segment, the company has been rendering to the domestic market supply. This has led to lower allocations for exports and increased prices in the domestic market.

Cost push as ferrous scrap prices rise further- Japan's leading EAF mill- Tokyo Steel increased scrap purchase price for all five works by JPY 2,000/t ($19), effective from 22nd Dec'20. The company would pay JPY 42,000/t ($405) for H2-scrap delivered at Tahara, JPY 41,500/t ($400) for Okayama and JPY 39,000/t ($377) for Utsunomiya works. Notably, this is the company's ninth price hike in Dec.

Demand- supply mismatch- Improving overseas demand and tight supplies continue to elevate prices in the domestic market.

Higher global prices- Japanese mills are offering HRC at premium levels in the export market as compared to Chinese mills. Thus higher export offers prompted domestic manufacturers to raise local prices.

Will this hike sustain?

Prices are expected to remain at these levels amid bullish market trends and higher global prices. Also, revival in domestic demand from the construction and auto sector may keep prices supported in the near short term.