Japan Steelmakers Accept 65% Rise

123jump.com Staff
18 Feb, 2008
New York City

Steelmakers in Japan negotiated a price increase of 65% with CVRD, Brazilian iron ore company. The price hike, is the third annual increase in as many years, totaling more than 100%. Prices are negotiated between steel companies and miners and not traded on future contracts on world stock exchanges. Steel companies closed higher after the news.

[R]5:00AM New York, 7:00PM Tokyo – Steelmakers in Japan negotiated lower than expected, but still a steep rise in iron ore prices, for the next fiscal year beginning in April.[/R]

Stocks in Japan rose fractionally after steel makers successfully negotiated for a lower-than-expected 65% increase in the prices of iron ore from CVRD, the Brazilian iron ore mining company. However a government report today showed that demand for services declined in February, and insurance companies declined.

Market Sentiment

In Tokyo trading Nikkei 225 rose marginally by 0.09%, or 12.84 to 13,635,40, and the broader Topix Index fell 0.1% or 1.90 to 1,332.99.

In the first section of the Tokyo Stock Exchange 10 billion shares valued at 1.1 trillion yen were traded and in the second section 309 million shares valued at 4.4 billion yen changed hands

Of the Nikkei 225 shares 127 gained, 86 declined and 12 were unchanged. Nikko Boseki led advancers with a rise of 6.31% followed by JFE Holdings climbing 6.27%.

Iron Ore Prices Rise 65%

The Nikkei news online reported today that four of Japan’s biggest steelmakers negotiated for a 65% increase in the price of iron ore with a Brazilian mining company CVRD. The increase was lower than what market watchers forecasted as prices were expected to double. The increase in the contract prices will be effective from April 1 of this year.

Service Demand declines

Japan’s Ministry of Economy Trade and Industry reported today that the Tertiary Industry Activity Index fell 0.6 % in February to 109.8%.

According to METI, industries that finance and insurance declined 3.3%, services fell 1%, compound services (postal service) slumped 10.3% and wholesale and retail plunged 0.5%.

Sectors that increased included eating and drinking with a rise of 1.5%, real estate gained 1.1%, learning support rose 4%, electricity, gas and heat supply & waste gained 0.7% and medical & healthcare improved 0.2%.

Gainers and Losers

Nitto Boseki led gainers in the Nikkei 225 index shares with a rise of 6.31% followed by gains in JFE Holdings of 6.27%, in Nippon Soda Co. of 5.95%, in Toshiba Corp. of 5.74%, in Advantest Corp. of 5%.

Nippon Steel advanced 3.23% after steelmakers negotiated lower than expected increase in iron ore price rise of 65%.

Toshiba Corp. after Credit Suisse raised its rating for chipmakers to “overweight”.

Reuters news reported that public broadcaster NHK will exit the HD DVD business format for high definition video and take ten billions of yen losses. The format war between Toshiba and Sony Corp. has slwoed the development of the high-definition DVD industry.

Pioneer Corp. led decliner in the Nikkei 225 index shares with a drop of 6.47% followed by losses in Trend Micro Inc. of 6.43%, in T&D Holdings Inc of 5.98%,in Mitsui O.S.K. Lines of 5.86% and in Sapporo Holdings of 5.84%.

T&D Holdings fell after Yomiuri online reported today that Aioi Insurance Company, which is due to report its financials on February 22, will report a full year loss of 80 billion yen on subprime related losses.

Millea Holdings also fell 5.49% on the news. Shipbuilders also declined. Kawasaki Kisen dropped 4.70%.