REFILE-Tokyo Steel maintains product prices for April, sees bright demand outlook

Mon Mar 17, 2014 3:52am EDT

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TOKYO, March 17 (Reuters) - Tokyo Steel Manufacturing Co will maintain current product prices for delivery in April as customer stockpiles grow after a winter freeze and labour shortages curbed construction projects, said the country's top electric furnace steelmaker.

But the firm, which feeds its furnaces with scrap steel rather than iron ore, said that longer term appetite for steel in Japan would be strong as construction work gathered pace.

The company's pricing strategy is closely watched by Asian rivals such as POSCO, Hyundai Steel Co and Baosteel, which aim to boost exports to Japan.

"Steel demand for public works as well as private projects including redevelopment projects in the Tokyo area remain strong," Managing Director Kiyoshi Imamura told reporters.

That contrasts with regional neighbour China, where the government is desperate to curb excess capacity in its bloated and ill-regulated steel sector by closing outdated and polluting mills.

"Given the recent drop in scrap prices and higher stockpiles of steel products, we will hold our prices unchanged," Imamura said on Monday. April will be the third straight month without a price rise.

He noted that the price of scrap steel had plunged about 10,000 yen ($99) per tonne in the first two months of this year to around 28,000 yen, with potential buyers less likely to make purchases as snow interrupted transportation. Many parts of Japan were hit by severe snow storms this winter.

Japanese inventory of three major steel sheet products - hot-rolled sheet, cold-rolled sheet and surface-treated sheet - stood at a 15-month high of 4.09 million tonnes in late January, according to an industry source.

As well as snow, Imamura said that growth in construction work had been crimped by a shortage of workers and trucks. With Prime Minister Shinzo Abe pushing for more public works as part of a drive to boost the country's economy, there have been fears over whether the country's rapidly aging population can supply enough labour.

But Imamura said the spike in stockpiles was temporary, with construction appetite soon expected to eat into them.

"Steel frame demand in Japan, for example, is expected to rise by 10 percent in the new fiscal year starting in April. Demand will likely pick up from July at the latest after budgeted public money starts flowing into projects."

Tokyo Steel's prices for main product H-shaped beams will stay flat at 80,000 yen ($790) per tonne in April, while prices for hot-rolled coil will remain at 66,000 yen per tonne.

Japanese imports of steel products hit a 16-year high in January, with overseas steelmakers targeting the country as China's huge overcapacity drives a prolonged price slump.

Both Chinese steel futures and spot iron ore prices lost 3.6 percent last week, the biggest weekly loss for the two commodities since May last year.

($1 = 101.4650 Japanese Yen) (Reporting by Yuka Obayashi; Editing by Joseph Radford)

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