China’s Steel Exports May Slow Rivals’ Price Gains, Nippon Says

Steel exports from China, the world’s largest producer, may outstrip demand in Asian markets, forcing rival manufactures to slow price increases, an executive at Nippon Steel Corp. (5401) said.

China’s rising exports may “cool” Asian markets, Nippon Steel Executive Vice President Shinichi Taniguchi said in an interview. China has been switching to exports this year and its total output may be 1.9 million metric tons per day based on output so far this year, exceeding last year’s level of 1.7 million tons, he said.

Additional Chinese supply may hamper some steelmaker’s efforts to boost steel prices to cover increased raw material costs. Exports accounted for 40 percent of Nippon Steel’s earnings in the last financial year.

“There’s a possibility we wouldn’t be able to raise prices as much as we have budgeted or slow the timing of raising prices,” Taniguchi said June 3 in the interview in Tokyo. “We will need to watch the market.”

Nippon Steel won’t match price cuts by other steel mills because it wants to protect its earnings, he said. It is in talks with domestic customers, including car makers to raise prices by 15,000 yen ($187) a metric ton from April to protect margins, Taniguchi said. The company’s steel prices averaged 806,000 yen a ton for the second half ended March 31, according to an April 28 statement by the Tokyo-based company.

Chinese crude-steel output gained 7.1 percent in April from a year earlier to 59.03 million tons, according to the National Bureau of Statistics. China’s domestic prices for hot-rolled steel, a benchmark, have gained 6.3 percent this year and today traded at 4,863 yuan ($750), according to data compiled by Bloomberg.

Material costs are expected to stay high, he said. Contract iron ore prices charged by Vale SA (VALE3), the world’s biggest producer, will probably stay at record levels in the July-to- September quarter, while Rio Tinto Group may drop prices 1.2 percent, Platts said last month.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Yasumasa Song in Tokyo at ysong9@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

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