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| Japan Wire rod |
Japanese integrated steelmakers have started negotiations to export wire rod to the Asian market from the first week of June.
Although there are differences depending on the product, most Japanese steelmakers plan to raise the price by at least $50 per ton.
However, according to local steel industry insiders, negotiations are becoming more difficult than before, contrary to the intentions of Japanese steelmakers.
In the first quarter, Japanese steelmakers raised prices for wire rod exports scheduled for the second quarter and managed to secure a certain volume despite weak market conditions in Asia.
This time, however, although there were signs of market price increases prior to the negotiations, weak demand due to the seasonal off-peak period and the economic slowdown in Asian countries, together with the decline in Chinese wire rod prices since early June, suggest that it will not be easy to raise prices.
In particular, there are concerns that demand in the construction sector, which has declined significantly due to the seasonal slowdown and the slump in the Chinese property market, could also lead to a decline in automotive demand.
The recent announcement by the U.S. and the EU of significant tariffs on Chinese cars, together with continued high interest rates, have led to a pessimistic outlook for further growth in automobile production in Asian countries due to reduced consumer spending.
The Japanese steelmakers' price increase plan is based on an increase in market prices and they are telling their customers that the increase in wire rod prices is a return to normal.
In response, major customers in Asia are not pushing hard for price cuts, but very few are accepting the actual price increases.
Japanese steelmakers argue that the price increase is justified due to a tightening supply-demand balance, citing that POSCO, a major supplier in Asia, is shutting down its oldest wire rod plant with a capacity of 700,000 tons per year.
However, major customers point out that even if POSCO shuts down its plant, the ongoing real estate slump in countries such as South Korea, China and ASEAN is likely to ensure that there will be no significant supply problems for wire rod.
More significant than POSCO's shutdown is the pricing of Chinese steelmakers. Chinese steelmakers are offering prices that are about $200 per ton less than Japanese steelmakers.
Jiangsu Shagang, a major Chinese steelmaker, raised the domestic price of wire rod by 100 yuan per ton in June. However, it left the export price unchanged.
Similarly, Baoshan Iron and Steel raised the domestic price for July shipments by 100 yuan per ton, but has yet to announce the export price.
The Japanese steel industry believes that even if integrated steelmakers push for a wire rod price hike, the market is unlikely to accept the increase due to the continued influx of low-priced Chinese products.
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