Kyoei signals 'emergency' output cut for dormant rebar mart
Osaka-based Kyoei made the surprise announcement on Wednesday when issuing its rebar price policy for August, keeping these unchanged for a second consecutive month.
"The current market (for rebars) is affected by the shortage of construction workers and by work-style reforms, and demand is declining due to delays in construction progress, delays in the start of construction, and revisions to projects," Kyoei said in a statement. "In response to this deterioration in cargo movement, we will devote ourselves to producing in line with the shipment volume and additionally, we will reduce production in order to maintain healthy market conditions," it said.
Kyoei had already planned to slow output for the summer months by about 10% when electricity prices in Japan soar. "The production cut will be about 20% (about 10 days) from the plan for July to August," Kyoei said in the statement, adding that "if necessary, we will consider further production cuts." Kyoei did not reveal what the cutback would mean in tonnage terms but industry watchers in Tokyo suggest production could be lower by between 20,000 and 30,000 tonnes this month and next from normal levels.
Kyoei's decision to roll over its prices was not surprising –market leader Tokyo Steel Manufacturing had announced no change to its August prices on Tuesday, as Mysteel Global reported – but the production cut decision certainly was and could provide the spark the steelmakers want, a market source suggested.
"Deciding to urgently reduce output may influence other rebar makers, and rebar supply may be tightened further this summer, in addition to the usual summer production cut," one noted. "It may put pressure on buyers – general contractors – because they have been slow to book construction materials because of delays to building projects, the shortage of workers and high-priced materials," the source said.
Another factor is that Kyoei had raised its list prices for June rebar sales by Yen 5,000/tonne ($32/t), as Mysteel Global reported, but the increase has still not been absorbed by the market. In its statement, Kyoei had stressed that "all costs such as energy, transportation, labour, materials, and repair work have risen (so) we have no choice but to pass these on to the selling price."
Making supply tighter may be the only leverage the mills have to achieve a rise in rebar prices, another source said. In Tokyo currently, deals involving SD295A 16-25mm rebars are still being negotiated at Yen 117,000-Yen 119,000/t while those in Osaka, Kyoei's home market, are still at Yen 104,000-Yen 105,000/t, both unchanged since May.
Written by Russ McCulloch, russ.mcculloch@mysteel.com
Edited by Alyssa Ren, rentingting@mysteel.com
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