Japan s top steelmaker said it was close to securing price hikes from domestic manufacturing giants, signaling the balance of power is shifting from buyers to sellers as the alloy's price surges.
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In an interview, Nippon Steel Corp. Executive Vice President Takahiro Mori said that they had seen a lot of progress in correcting contract prices. The second half contracts have been almost settled. Japan's steel suppliers are gaining the upper hand in a market where carmakers, their biggest customers, have more bargaining power. Senior executives of the steelmaker have been increasingly vocal in wanting better terms for domestic contract prices to bridge the gap with international prices. In May, the president warned that the company can't take responsibility for stable supply unless domestic prices are corrected.
Domestic steel users have accepted the company's call to raise contract prices to reflect cost surges, according to Mori. Nippons average price for products sold overseas and at home rose to the highest since 2008 in the three months through September, due to tight supply and robust demand.
As part of its push to change traditional business practices in Japan, the steelmaker is trying to bring more changes to the way contracts are implemented. He said it wanted to conclude talks before it begins delivery, shorten the contract terms to three months from six and deliver products only after agreeing on prices. The talks with buyers for the second half of the year ending March typically end around February, although delivery starts before that.
The executive didn't say anything about the details, including naming the customers or size of the price hikes, but they said the negotiations are private. The talks between Nippon Steel and Toyota Motor Corp. are held twice a year and are closely watched as they typically serve as a benchmark.
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The question is what will happen if the market goes around, said Takeshi Irisawa, an analyst at Tachibana Securities Co. Users like Toyota could demand price cuts when conditions for steelmakers turn sour, he said.
Mori expects the recovery to continue, although the company will monitor the impact of the resurgence in coronaviruses in some regions.
The World Steel Association said last month demand should go up again next year and that the main driver of growth will be outside China as the country's real estate crisis undermines consumption. The risk of a collapse of the world's biggest market is mitigated by China s drive to reduce steel output to curb emissions, Mori said.
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