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Domestic iron and steel prices in December declined by 0.2% from November, according to the latest figures from the Bank of Japan's latest Corporate Goods Price Index (CGPI), its equivalent of the Producer Price Index.
Compared with a year earlier, prices are down by 9.6%. They are also down by 1.6% on the corresponding month in the previous quarter.
The latest figures mean that prices have now posted back-to-back declines for 15 straight months. With demand in many sectors, especially the key manufacturing and housing markets, remaining very weak, it has proved very hard for mills to raise prices at home.
However, a firming in regional prices meant that export prices were up for a third straight month, with prices for metal products including steel rising by a healthy 2.6%.
Mills have put a priority on raising export prices and have indicated that they will be looking to push though significant price increases in the current quarter as regional prices continue to rebound.
The need to force through higher export prices has been increasingly critical given the outlook at home. While steel demand is firm from the civil engineering and construction industries, primarily due to reconstruction and disaster-related construction activity, demand is weakening from the domestic manufacturing sector.
However, mills are adopting an increasingly aggressive stance on prices, with most mini-mills looking to push through significant hikes in rebar and long product prices as they look to offset rising input costs such as those of scrap and electricity.
In particular, the market will be carefully watching what the country's largest electric arc furnace operator does. Tokyo Steel is set to announce its selling prices for February shipments in the coming days and most expect to see it unveil significantly higher prices.
While it left its selling prices for January shipments officially unchanged, its third straight month of doing so, it noted that it would not be offering any of its usual discounts.
Domestic steel prices could also receive further impetus in the months to come following the announcement by the government of its ¥1.3 trillion ($14.6 billion) economic stimulus package, a big portion of which is being earmarked for construction projects.
Also helping steelmakers raise prices at home is the rising cost of imports as the yen weakens and the Korean Won and other regional currencies gain strength.
Tokyo Steel has consistently said that its failure in recent months to raise its prices has been at least partly attributable to a flood of cheap imports, particularly those from South Korea.
However, December saw the price of steel and other metal imports rise for a second straight month by 2.3%, a trend that is likely to continue as the yen weakens further.
Japanese steel producers continued to see lower prices in December at home although they enjoyed a rally in export prices on the back of a weakening yen.