Steel Price Hikes to Impact Japan’s Manufacturers as Costs Surge

Japan’s biggest steelmaker -- grappling with rising raw-material costs, a falling yen and waning demand -- has warned the nation’s manufacturing giants face more price hikes this year.

Nippon Steel Corp. is securing increases on contract prices through negotiations with domestic customers in the second half of the fiscal year through March, Executive Vice President Takahiro Mori said in an interview. The company will pass on the surge in costs, including for iron ore and coking coal, which have been exacerbated by a historic decline in the yen. 

The rise in raw material costs has been “quite different” from Nippon Steel’s assumptions made earlier this year, Mori said. The portion of the extra costs, which were shouldered by the company in the first six months of the fiscal year, “will be reflected in product prices from October,” he said. 

The price of iron ore, the major input cost for steel, jumped 32% in the three months through March but has now more than given up those gains amid weakness in China’s steel sector. The yen, meanwhile, has dropped by around 18% against the dollar this year.

Nippon Steel has already secured a big hike from customers that negotiate prices on a shorter-term basis. It won an increase of at least 40,000 yen ($286) a ton for the July-to-September period, according to Mori.