Japan’s steelmakers agree to 100% price hike for Australian iron ore

June 24, 2008
By Ken Worsley

One day after China’s Baosteel Group agreed to pay up to 97% more for Australian iron ore, Nippon Steel and other Japanese steelmakers are set to accept a 100% jump in prices for the same iron ore. This follows a 65% hike in prices for Brazilian iron ore that was also recently agreed to. 60% of Japan’s iron ore for steel comes from Australia.

What can we expect to follow? It seems unlikely that Nippon Steel - Japan’s largest steelmaker - and its four main domestic rivals (JFE, Sumitomo Metal, Kobe Steel and Nisshin Steel) will be able to get away with not passing costs on to customers. This could put a pinch on automakers who have already felt the sting of increased steel prices over the past year. In the fourth quarter of 2007, the spot-market price for hot-rolled sheet steel was at $535 a ton. Since then, that price has shot up to $1,035.

Although this may hurt Japanese automakers domestically for the time being, as customers put off purchases of cars until prices come back down, it could be a boon for Japanese automakers in the US market, where they are in better position to sell smaller, more fuel-efficient, “steel friendly” autos.

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