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Disappointing Chinese Deals For Japanese Stainless Exports
Japan's stainless steel manufacturers face a disappointing state of negotiations this week on their export deals of nickel-based CR sheets for shipments to China covering December through January next year. They admit few cases of a negotiated deal as local customers as a whole still favor continued purchases for immediate requirements alone.

In a normal year, the Japanese stainless steel producers get considerable orders from China for Ni-based CR sheets after the nation's foundation anniversary and the subsequent holidays, given that the current LME nickel prices stand at a level of US$11/lb. As a matter of fact, Chinese inquiries are on the increase, but there is a continued difficult situation in which to negotiate deals to meet inquiries for spot requirements. As a result, actual negotiations are limited to those with users having a track record each in their purchases of high-grade stainless CR sheets from Japan.

Behind Chinese customers' continued wait-and-see stance lie the repercussions of the world's excessive stainless steel production, a problem that remains unresolved. For another factor, a price increase is difficult to execute for stainless CR sheets because of intense sales competition. Having an impact, too, are much higher prices in stainless steel exports out of Japan than those out of the world's other nations.

The world's stainless steel production totaled 15.6 million tons in the first half of this year, translating into an annualized level beyond 30 million tons, compared with a total of 28 million tons last year. As a result, it follows that global stainless steel production is on the increase this year, with China accounting for the bulk of the increment.

As to China's stainless steel production in September, the definite figure has yet to become clear. China's various stainless steel manufacturers are said to have reduced their production until August. Actually, though, they are thought to have executed few production cutbacks until now, which is akin to the cases of South Korea's Posco and Taiwan's Yieh United Steel Corp (Yusco).

The Japanese stainless steel producers set the asking price at US$3,400/ton C&F in their export deals of Ni-based CR sheets for shipments to China. The corresponding prices stand at a level of US$3,200/ton C&F for products from South Korea and Taiwan. With the current LME nickel prices at a level of US$11/lb, though, the environment is seen as calling for a major price increase when it comes to exports of Ni-based stainless CR sheets.

Posco usually makes spot purchases of stainless steel scrap from Japan. The company's current purchase price is estimated at a level of Y230,000/ton FOB that translates into US$2,700/ton FOB. By a simple calculation, it would take US$800-900/ton to process stainless steel scrap into finished stainless steel. As a result, it is considered difficult for Posco to profit by its exports of Ni-based stainless CR sheets at a price level of US$3,200/ton C&F. Until recently, Posco was positive in exporting Ni-based stainless CR sheets to dispose of excessive products. At present, though, there are signs of Posco having a tough time meeting high costs of raw materials in its stainless steel production. In September, Posco executed a domestic price increase of stainless steel products by W350,000/ton (US$313) when LME nickel prices stood at a level of US$10/lb. LME nickel prices have moved up to a level of US$11/lb since the beginning of October, a situation in which a further domestic price of W200,000/ton (US$179) is seen as necessary for Posco's stainless steel products.

In Taiwan, meanwhile, Yusco is expected to reveal a November price Oct 15 for its domestic shipments of Ni-based stainless CR sheets, presumably with a price increase of NT$1,000/ton (US$31) or more. The company's previous price increase was NT$3,000/ton (a little less than US$95).

In China, Taiyuan Iron & Steel Group Co increased its domestic sales price of Ni-based stainless CR sheets by Yn500/ton (US$74) last week to Yn24,420/ton (US$3,591) after tax. By comparison, the current Wuxi stainless steel market for Ni-based CR sheets is assessed at Yn23,700/ton (US$3,485) after tax, up Yn2,000 (US$294) from the August level. But the Wuxi market situation is devoid of momentum.

As far as Europe is concerned, stainless steel transactions are in good shape amid lots of inquiries. The going prices indicae an advance in the equivalent of US$500/ton after an increased nickel surcharge of 200 euros/ton, prices that translate into a level beyond US$3,800/ton. As a result, there are forecasts that Asian stainless steel manufacturers will react with sales offensives toward Europe.
last modified : Wed 20 Oct, 2010 [09:49]
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