Japan's domestic rebar price may rise on higher scrap cost

Japan's domestic rebar price, despite having been hovering at its 13-year high, may still have room for further rises as producers may raise their list prices with the surge in scrap price recently, and domestic distributors have also appeared more aggressively pushing through previous price hikes by producers, sources shared on Thursday.

As of October 14, mini-mills in Kanto area around Tokyo are paying around Yen 52,000-53,000/tonne ($458-467/t) for H2 grade scrap, up Yen 4,000/t from last Friday and Yen 6,000-7,000/t higher on month, while the SD295A 16-25mm rebar are transacted at Yen 90,000-91,000/t in Tokyo, unchanged on month, sources confirmed.

A Tokyo-based distributor, for example, shared that his company is targeting at Yen 93,000/t for SD295A 16-25mm rebar domestic sale by the end of this month and Yen 95,000/t afterwards, and "recent strengthening in scrap price has stopped some customers from bargaining for far lower prices," he added.

Over May-October, Japan's rebar producers have lifted their list prices for domestic sales by Yen 10,000-11,000/t, though in actual transaction, spot prices have gained by Yen 8,000-9,000/t, according to market sources.

"Rebar producers have been raising their list price on rising input costs, and recent increases in scrap price will probably trigger another round of rebar price rises and at a larger degree among mills to safeguard their profits," the distributor noted.

A Tokyo-based construction steel trader estimated Yen 90,000/t the borderline for Japan's rebar producers to stay profitable, but with Japan's scrap price expected to rise further and higher input costs from auxiliary materials, power charge and delivery fee this month, most of Japanese mini-mills including rebar producers are probably planning for higher prices for November November.

Or, "some may hold off offering, just to monitor the price movement for a while," he added.

Kyoei Steel, Japan's largest rebar producer, for example, has resumed offering its rebar since October 7 from its Yamaguchi works in western Japan after having halted the offering on September 24, but it has added another Yen 2,000/t to its list price after the initial increment by Yen 3,000/t to Yen 93,000/t for October sales due to higher input costs, though the latest add-on does not apply to its other three works, according to the company.

"Temporary halt of offerings usually leads to further upward price adjustment, just like Yamaguchi works, but customers will not be grudging much amid the tightening in supply, and such a practice may be commonplace under the present market circumstances," the trader explained.

Written by Yoko Manabe, yoko.manabe@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.