Steel prices in Japan have dropped sharply, coming down to levels not experienced in four years. The steep decline has primarily resulted from a flood of low-priced steel imports from China. These imports have inundated the Japanese market. The cost of hot-rolled steel sheets is falling fast. In the Tokyo area, the 1.6-millimeter type has recently been selling at an average distribution price of 112,500 yen ($766) per metric ton.
Since the end of June, the price of 1.6-millimeter hot-rolled steel sheets has dropped by 4%. This decline represents the continuation of a larger downward trend that has continued since last summer of 2022. Given current conditions, prices are more than 30 percent below their high in the summer of 2022. During that same period, steel prices jumped to record highs. The prior lowest price on record for this grade of steel sheet was in August of 2021.
To make matters worse, steel imports from China have gone through the roof—largely from state-owned enterprises such as Baoshan Iron & Steel. This massive influx has been hugely responsible for driving down prices. Lower-priced products have entered the marketplace in droves. This drives domestic producers in Japan to reduce their prices and maintain competitiveness. Unfortunately, this scenario has led many of our local manufacturers to worry about their profit margins or even their long-term viability in the marketplace.
A continuing trend, according to industry analysts, could have permanent effects on Japan’s steel industry. While consumers appreciate lower prices, domestic steel producers go out of business. Intense competition from foreign, often subsidized products creates a challenging marketplace where it’s difficult for them to survive, let alone thrive. This new dynamic creates a troublesome challenge for policymakers, who must walk a fine line balancing consumer interests with the need to continue nurturing their own local industries.