Nippon Steel Corporation said that it will slash the February 2009 wholesale price of H beams by more than 30%, its first price cut in three and a half years on this key steel product used in construction. H beams will likely fall to about JPY 80,000 a tonne after being reduced by JPY 40,000. This marks the first announced price cut by a blast furnace steelmaker since the economic downturn became clear last autumn.

Nippon Steel had kept prices steady after hiking them intermittently from February to July 2008 period. But the sharp weakening of demand has prompted it to decide on price cuts. The move is expected to cause other blast furnace steelmakers, such as JFE Steel Corporation, to follow suit. The predominant view is that the costs for iron ore and coking coal, the raw materials used to make steel in blast furnaces, will decline in fiscal 2009. This has caused big users of steel to step up pressure on steelmakers to cut prices.

Toyota Motor Corporation and other automakers are expected to demand price reductions of JPY 30,000 to JPY 35,000 per tonne for automotive steel sheet when the parties negotiate prices for next fiscal year. The latest announcement may lead to stronger calls for price reductions on steel products other than H beams.

Electric furnace steelmakers have already lowered H beam prices on the back of lower costs for scrap iron. Tokyo Steel Mfg Co cut prices by a total of JPY 50,000 from September to December 2008 period, making its H beams up to JPY 45,000 cheaper than similar products offered by blast furnace steelmakers. Facing a drop in demand, Nippon Steel stopped taking wholesale orders for H beams in past November.