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Japanese Integrateds To Seek $500-600 Markups In Q2 GO Elec Sheet Exports
Japanese integrated steelmakers are contemplating seeking price increases of US$500-600/ton in their export deals of GO (grain oriented) electrical sheets for April-June shipments to the world's destinations. Also, they are considering executing more price increases of US$500-600/ton in the export deals they negotiate for July-September shipments.

The Japanese steelmakers usually negotiate for annual or semiannual supply contracts when it comes to exports of GO electrical sheets. This time, though, they favor quarterly deals for April-June shipments onward. For the motivation, they find it difficult to conclude long-term supply contracts for fears of increased production costs because a considerable advance is forecast in what they pay for imports of iron ore and coking coal in fiscal 2010 (April 2010-March 2011).

The Japanese steelmakers' price ideas collided with their customers' in the preliminary negotiations held between the two sides on new supplies of GO electrical sheets from Japan. The customers argued that the Japanese steelmakers should apply a more price reduction in their exports at a time of decreased demand for GO electrical sheets. On the contrary, the Japanese steelmakers pointed out that the world's transaction prices of GO electrical sheets had already bottomed out whereby the prices would move up.

The world's demand for GO electrical sheets held steady until the first half of last year. From the latter half, though, prices of GO electrical sheets turned downward in the wake of diminished demand. In China, two major integrated steelmakers have executed a major price reduction each in their domestic sales of GO electrical sheets since the beginning of this year. Baosteel Co cut the asking price by Yn1,500/ton (US$220) for January shipments. Wuhan Iron & Steel Group Corp has priced down what it sells by as much as Yn4,350/ton (US$640) for March shipments.

Under the existing circumstances, the Japanese steelmakers believe that the world's current market conditions indicate the floor of transaction prices as to GO electrical sheets. Among other things, new electric power projects have resumed in the world's various nations until now after their suspensions, triggered by the collapse of Lehman Brothers Holdings Inc. Still, as a rule of thumb, the ensuing demand for GO electrical sheets arises in a half year or 10 months after the execution of any new electric power project. Therefore, it follows that the world's demand for GO electrical sheets will be headed for a recovery in the latter half of this year.

In this connection, the Japanese steelmakers are bound to face a test of patience in their export deals of GO electrical sheets in the April-June and July-September quarters. But they are contemplating seeking a recovery of prices with increases of US$500-600/ton both for April-June and July-September shipments, given a considerable advance in raw materials prices. Besides, restrictions are put on export volumes to China for March shipments, thereby letting local users work off their stocks of GO electrical sheets. The Japanese steelmakers are set to continue the restrictions on April shipments as well.

Meanwhile, the Japanese steelmakers are scheduled to start negotiations shortly on their exports of non-GO electrical sheets to China for May-June shipments as they are done with their negotiations on April shipments there. But some Japanese steelmakers indicate moves to avoid new Chinese deals amid tight supply-demand conditions for what they export. They have apprehension of losing exportable volumes for non-GO electrical sheets from May onward or facing a considerable shortage of exportable cargoes. With Chinese deals of limited export volumes, there is a possibility that the Japanese steelmakers will attempt another price increase of US$250/ton for May shipments onward after they have won a price increase of US$200/ton for April shipments.
last modified : Thu 11 Mar, 2010 [10:38]
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