Steel products in Japan are now less expensive than water when you consider their weight. This is a big change for the market. The primary source of the current crash in steel prices has been fierce competition among distributors. Consequently, their prices have plummeted to historic lows.
The price of steel products in Japan has dropped off a cliff, further squeezing Japan’s steel producers. Over the last few years, these manufacturers had been trying to merge their way out of their troubles and increase prices to unify the market. The long price decline has undercut those efforts, and many industry leaders are still trying to make sense of its ramifications.
Intense new competition among distributors is fueling this trend. They are all anxious to bring in more business. Steelmakers are under immense pressure as companies with rich cost structures undercut each other’s prices to take customers. This extreme competition complicates their ability to maintain their pricing initiatives. Steel has gotten so cheap, it’s cheaper than water. This unexpected development demonstrates how far prices have truly plummeted.
In an effort to combat these hurdles, Japan’s steelmakers have made moves to eliminate production capacity in an attempt to prop up prices. These efforts were intended to better match demand with supply. They haven’t, as competition has kept profits bleeding out. Analysts are calling for steelmakers to make even deeper production capacity cuts. That might just be the key to their survival in an increasingly difficult tide today.
As the industry continues to find its way through these choppy waters, stakeholders are asking what’s next. The combination of lower prices and reduced production capacity could have lasting effects on the steel sector and its workforce. Furthermore, if distributors do not stop competing on price at the expense of profitability then further volatility will occur within the market.