Mitsui Engineering to Seek 30% to 40% Price Cut on Ship Plate

Mitsui Engineering & Shipbuilding Co., Japan’s second-largest shipbuilder, will ask steelmakers to cut plate prices to a four-year low as demand weakens. The company will seek cuts of 30 percent to 40 percent for the fiscal first half starting April 1, returning prices to 2005 levels, Tamiyoshi Iwasaki, the head of the company’s ship and marine division, said in an interview in Tokyo.
A financial crisis has triggered a drop in steel demand, making it easier for buyers ranging from Toyota Motor Corp. to Hitachi Construction Machinery Co. to demand lower prices for the metal, a year after paying record levels. Mitsui Engineering purchases the alloy from Japan’s Nippon Steel Corp. and JFE Holdings Inc., the world’s second- and third-largest steelmakers.
“Steel prices will definitely go down,” Iwasaki said Feb. 27. “The question is to what extent we can make reductions.”
Japanese shipbuilders, which have historic ties with domestic mills, should receive a lower price for plate than the $700 a metric ton agreed by the nation’s steelmakers with South Korea yards, Iwasaki said.
“Plate manufacturing technology and quality is what Japanese mills have developed together with Japanese yards,” Iwasaki said. “It doesn’t make sense for them to sell that plate at the same level as to South Korea.” He declined to give the current price paid by the company.
Mitsui Engineering fell 2.1 percent to 141 yen as of 10:23 a.m. on the Tokyo Stock Exchange. The stock has fallen 57 percent in the past 12 months, compared with a 46 percent slide in Japan’s benchmark Nikkei 225 Stock Average.
Expansion Plans
A global recession has ended a five-year boom in marine transportation, hurting new yards in South Korea and China. Order cancellations and curbed expansion plans in Asia will ease a forecast overcapacity, alleviating concern that the performance of Japanese yards would be threatened, Iwasaki said.
“Ship supply will be naturally curbed as a result of the financial crisis,” he said.
China’s new order volumes surpassed Japan’s in 2006, six years after Japan lost its title as the world’s largest shipbuilding nation to South Korea.
Mitsui Engineering’s ship division will post an operating profit this quarter, while “barely” turning to profit in the year ending March 31, after a stronger yen, plate delivery delays and costs linked to a crane accident led to a 3 billion yen ($30.8 million) loss in the nine months to Dec. 31, Iwasaki said.
The division, which builds bulk carriers, and oil and gas production vessels generated sales of 302.3 billion yen last fiscal year, accounting for 46 percent of total revenue and ranking the business second after closely held Imabari Shipbuilding Co. in Japan. Mitsui Engineering also builds chemical plants, marine diesel engines, and bridges. 　　 Hitachi Construction Machinery, the world’s largest maker of giant excavators, will seek to cut prices of steel plate to at least 2007 levels next fiscal year, Chief Executive Officer Michijiro Kikawa said Feb. 19.