Tokyo Steel to Cut Prices as Construction Declines

By Masumi Suga

Dec. 14 (Bloomberg) -- Tokyo Steel Manufacturing Co., Japan’s largest maker of construction girders, will reduce prices for the second time in three months as manufacturers cut back investment and the government reviews public works spending.

Prices of H-beams will drop 2,000 yen, or 3.1 percent, to 63,000 yen ($711) a metric ton for January contracts, the lowest since February 2004, the Tokyo-based company told reporters. The hot-rolled coil price will drop 3.5 percent to 55,000 yen.

Uncertainty over the economic outlook in the world’s second-largest economy is prompting Japanese companies to reduce capital spending. Construction steel prices are also declining as the new government of Prime Minister Yukio Hatoyama, under pressure to control spending, reviews public works projects, said Tokyo Steel Managing Director Naoto Ohori.

The bottom of domestic steel demand “is not in sight yet,” Ohori said today in Tokyo. “Production levels are too high, given the size of demand,” he said.

Tokyo Steel shares gained 0.6 percent to 1,041 yen at 1:24 p.m. local time on the Tokyo Stock Exchange.

Large enterprises plan to cut capital spending by 13.8 percent this fiscal year, the Bank of Japan’s Tankan index of corporate sentiment showed today. It was the worst reading for a December survey and compares with a 10.8 percent decline three months ago.

Product Prices

Tokyo Steel Manufacturing said it will cut most of its other product prices including plates and deformed steel bars by 2,000 yen, compared with December. The company will maintain the price of wire rods at 61,000 yen per ton.

The increased value of the Japanese currency has raised concern that domestic products are becoming less competitive compared with imported steel, Ohori said. The yen, which last month appreciated to the strongest level since July 1995, traded at 88.85 yen to the dollar at 1:26 p.m. in Tokyo. 　　Tokyo Steel’s price cuts contrast with gains outside Japan. Baosteel Group Corp., China’s largest steelmaker, raised benchmark product prices by 8 percent for January delivery, the first increase since September, on rising raw material costs and improving demand from automakers.

To contact the reporter on this story: Masumi Suga in Tokyo at +81-3-3201-3088 or msuga@bloomberg.net