Mitsubishi Heavy Wants Steel-Plate Price Cuts on Lower Shipping Demand

Mitsubishi Heavy Industries Ltd., Japan’s third-largest publicly traded shipbuilder, is seeking price cuts for steel plates used in vessels, suggesting steelmakers face difficulties in passing on higher costs.   Prices should drop as demand for steel plates will remain “low” amid uncertainty over the global shipping recovery, Hisashi Hara, general manager of the Mitsubishi Heavy’s shipbuilding and ocean development division, said today in Tokyo. Contract talks are “deadlocked,” he said.
Nippon Steel Corp. and JFE Holdings Inc., Japan’s two largest steelmakers, are asking shipbuilders and carmakers to accept price increases as the industry faces 1 trillion yen ($11 billion) of higher raw material costs. The European debt crisis is raising investors concern over a possible slowdown in the global economic recovery.
Higher steel prices “will have a destructive impact on the shipbuilding industry,” Hara told reporters and analysts. Customers may buy fewer ships should a steel price increase lead to higher vessel prices, the Tokyo-based company said in a statement on its website today.
Mitsubishi Heavy, the top producer of heavy machinery in Japan, fell 0.9 percent to 319 yen on the Tokyo Stock Exchange.
Rising prices of iron ore and coking coal increased costs for Tokyo-based Nippon Steel by 15,000 yen a ton for the April- to-June quarter, and may further push up costs by 10,000 yen for the three months starting July 1, Executive Vice President Kozo Uchida said last week.
Domestic consumption of steel for ships accounted for 10.7 percent of the total for the year ended March 2009, according to data from Nippon Steel. Domestic use for automotive steel made up 20.4 percent.
Nippon Steel is in the last phases of negotiations with Toyota Motor Corp. that will probably lead to a 25 percent price increase for the April-to-September period, Nikkei English News reported June 3, without saying how it obtained the information.