Due to intense competition among distributors, steel prices have plummeted, with the price of steel products in Japan now being lower than the price of water when calculated by weight.
According to a report by Nikkei Asia, data collected from the “Nikkei POS”, which gathers sales information from supermarkets and other stores nationwide in Japan, shows that in March, the average price for a 1-liter bottled mineral water from Suntory Beverage & Food was 156 Japanese yen (1.09 US dollars), marking a 5% increase compared to the previous year.
In the Tokyo area, the distribution price of 1.6 millimeter cold-rolled steel sheets widely used in manufacturing and other industries is around 141,500 yen per ton. The price per kilogram (equivalent to the weight of one liter of water) is approximately 141.5 yen, making it cheaper by nearly 15 yen compared to water.
Similarly, the price of 1.6 millimeter hot-rolled steel sheets is around 117.5 yen per kilogram. The prices of both types of steel sheets have decreased by 4%-6% compared to the previous year.
“Iron cheaper than water” has become a popular phrase in the steel industry. Manufacturers are caught in intense competition due to their massive production facilities, leading to low profits and selling in large quantities becoming the norm.
In 2020, major manufacturers began reforms. Nippon Steel temporarily suspended or closed blast furnaces nationwide, reducing the total number of their furnaces from 15 to 10 as of last month. JFE Steel Corporation also closed a blast furnace in 2023.
According to a report from the Japanese Ministry of Economy, Trade, and Industry, as of February, Japan’s crude steel production capacity totaled 1.1 billion tons, a decrease of about 13 million tons compared to 2019, representing a 10% decline.
The reduction in blast furnace production has alleviated overcapacity, putting the brakes on the previous price war. Around 2021, steel prices had surpassed water prices.
However, with the diminishing effects of reform measures, steel prices have once again fallen. One factor contributing to this is the price war among distributors.
A sales representative from a steel manufacturer mentioned, “Some distributors sign contracts at prices lower than the manufacturer’s selling price and then demand further price cuts from the manufacturer.”
The excessive number of distributors has long been a concern. Hiroji Hashimoto, Chairman and CEO of Nippon Steel, stated during a Steel Distributors Association meeting in June 2024, “The restructuring and rationalization of distributors are inevitable.”
The challenges in the steel industry highlight the complexities of balancing competition and sustainability in a global marketplace, and ongoing efforts are being made to stabilize prices and optimize the supply chain for long-term viability.