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Negotiations On Blast Furnace Wire Rods Proceeding By $50 Increase For Next Qtr
The Japanese blast furnace mills' negotiations on steel wire rods have started for shipment of next quarter (April - June). Markups of $50 from the current prices are offered. In negotiations, in order to explain the reasons of price increase with care, the mills are thinking to make most of their contracts month by month, and then, to leave their prices unchanged for April shipment and raise them monthly by $20 to 30 for May/June shipment.

Against the background of price hike of raw materials and so on, the blast furnace mills raised their prices by $250 for the first half of last fiscal year. While, in the latter half of the fiscal year, as they were forced to make adjustment of their first half prices from $250 to $200 due to demand decrease in steel products. Therefore, in shipment during January through March, they decreased their prices by $50 or so against customers of price rise, and deferred adjustment against customers under negotiations of price increase.

In case of next quarter, prices of raw materials for a blast furnace like iron ore and coking coal are to be decreased. Furthermore, the yen keeps weakening at present. For these reasons, it is widely thought by customers that there are no factors of price increase due to decrease in production costs. However, the blast furnace mills have to use raw materials carried over from the previous quarter in next quarter, and as prices of raw materials are not decreased largely, the exchange rate of the mills has been originally set at $1 equal to the level of 80 yen which has not much effect on costs, and their prices have not reached the profitable line yet, the surroundings are needed to obtain an understanding of customers.

In order to persuade customers over time, blast furnace mills seem to have left unchanged their prices for April shipment. They are to carry out price increase little by little for May/June shipment, and to raise those by $20 to 30 a month.

Demand for wire rods is strong mainly for the automotive industry. In China, from the facts that the automotive industry had been slumping till now, subsidy of the government was abolished, and so on, demand had dropped, and inventories had increased. However, inventory adjustment is completed, and Baoshan Iron & Steel and Wuhan Iron & steel raised their prices of wire rods by 100 to 200 CNY ($16 to 32) for April shipment. In the Southeast area, inquiries from Thailand are increasing by 30% from the normal due to returned demand from the massive floods. In Indonesia as well, inquiries are firm due to the strong automotive industry. The stance of Korea's POSCO is not clear. In the domestic market, the company seem to achieve virtually its price increase by reducing its discount range. The company is said to show its stance to expand sale for export from now because operation of its new wire rod mill (capacity of 700 thousand tons a year) of Pohang Steel Works will start next year.

In the USA as well, demand for wire rods is strong. The US wire rod mills noticed to each customer their price increase by $60 to 100 for April shipment. If such price increase is not accepted, they are said to be in a strong attitude that they will not sell wire rods to such customer. In the backdrop, there ia the fact that demand for cars has returned.

For the time being except the European area, there is no cause for concern on wire rods. With this, if taking time, price rise is expected to penetrate into a market.
last modified : Fri 23 Mar, 2012 [10:25]
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