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Nippon Steel sheet-price hike could forge trend

TOKYO -- Nippon Steel & Sumitomo Metal will raise prices for steel sheet used to make construction materials and autoparts by about 20%, the company said Thursday, its first price hike in roughly three years.

Prices will increase 10,000 yen ($91.89) per ton starting with June shipments for three main types of steel sheet -- hot-rolled, cold-rolled and coated -- that are sold to distributors and metalworking companies.

The Japanese steelmaker will pass on higher costs for iron ore and other raw materials, which have risen on growing speculation that the Asian steel market is bottoming out. Chinese blast-furnace steelmakers have cut production and raised prices since the start of the year, sparking a rebound in Asia's steel prices. With the influx of cheap steel slowing, demand is growing for products exported by Japanese steelmakers.

"Shipments to automakers will recover in July or afterward, and demand for use in construction related to the Tokyo Olympics will also grow," a Nippon Steel sales staffer for steel sheet predicted.

Iron ore spot prices have surged more than 50% since the end of last year to around $60 per ton. The price that Nippon Steel pays under contract for the July-September period likely will climb from $39 for the preceding quarter.

Steel prices in Japan have continued to decline, so Nippon Steel's price hike could become a turning point if it spreads across the industry. The steelmaker likely will press for higher prices in negotiations with major customers such as automakers and electronics manufacturers.

But an official at a steel trading house said the price hike will take time to spread because sheet demand is still sluggish. Steel-sheet inventories were relatively high at 4.09 million tons as of March 31.

Furthermore, downward pressure on Chinese steel prices has strengthened this month as small and midsize mills in China move to resume production, which could send surplus steel flooding into Japan.

Nippon Steel's pretax profit plunged more than 50% for the year ended March 31. An improvement in earnings will hinge on whether its price hikes take root.

(Nikkei)

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