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Japan, South Korea steelmakers seek to pass on ferrovanadium cost rise

Tokyo — Japanese and South Korean steelmakers plans to raise prices of specialty steel to pass on the surge in ferrovanadium and other ferroalloy prices, mill sources said Friday. There are Japanese buyers who are currently paying steel prices negotiated when ferrovanadium (80% V) was $40/kg, the mill sources said. This week, Chinese traders were heard offering spot material at $140/kg FOB Dalian. And the price jump is not likely to be a short-term trend. Chinese demand will remain strong on the back of the country's new high-strength rebar standard mandating the use of ferrovanadium.

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One Korean steelmaker has been communicating with steel buyers on the ferrovanadium price hike on a regular basis in the past few months. The mill has asked some customers to accept the steel price hike, the mill source said.

In Japan, steel prices for some buyers have increased already, as the Japanese steelmakers run an "alloy surcharge system" where ferroalloy cost fluctuations are automatically passed on to steel prices.

Stainless steel prices, for example, reflect changes in monthly nickel and quarterly ferrochrome prices as these two feedstocks comprise a major share of the total production cost, according to Nippon Steel and Sumikin Stainless Steel Corporation that initiated the system.

Some mills have expanded the alloy surcharge system to include ferrovanadium, molybdenum, ferroniobium, ferrotitanium, neodymium and other rare earth prices as well.

Not all specialty steel sales are covered by the surcharge system, however.

One Japanese mill source said there were various steel pricing approaches because of different end-user requirement. Some seek quality guarantee by identifying the minimal mechanical strength. There are customers who specify the chemical composition in steel. In the case of the latter, alloy surcharge system was likely to apply.

Another mill source said steel pricing also had to do with customers' purchase policies, rather than product types.

The mills need to hold discussions with end-users not covered by the surcharge system. "It is not just ferrovanadium but other raw material costs have risen," one source said.

Ferrovanadium, ferrotitanium, molybdenum, cobalt, and ferrotungsten prices have risen this week by 27-264% from last year's average, according to S&P Global Platts data. Ferrovanadium posted the highest rise of 264%, followed by ferrotitanium's 120%, molybdenum oxide's 45%, cobalt's 38% and ferro-tungsten's 27%. London Metal Exchange nickel prices have stayed above 2017 levels but have started to weaken this week.

On the other hand, Chinese rare earth export prices have stayed weak this year on the back of major automakers cutting consumption after developing new technologies, one Japanese end-user said. The Platts CIF China charge chrome price this week was down 15% from last year's average.

-- Mayumi Watanabe, mayumi.watanabe@spglobal.com

-- Edited by Elizabeth Thang, newsdesk@spglobal.com