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INTERVIEW-Nippon Steel expects high China steel prices throughout 2017


Reuters

* Strong China steel prices to help support global market
    * Possible U.S. trade action on steel still a big concern
    * Coking coal prices to fall to $160/T if disruptions solved
    * Mulling making composite auto materials of steel, carbon
fibre

    By Yuka Obayashi and Ritsuko  ShimizuTOKYO, Aug 10 (Reuters) - Nippon Steel & Sumitomo Metal Corp
<5401.T>, Japan's biggest steelmaker, expects China's steel
prices to remain elevated throughout the year as Beijing's
infrastructure spending boosts local construction demand, a
senior company official said.
    Chinese steel rebar futures <SRBcv1> surged to their highest
since March 2013 this week, lifted also by worries over tighter
supply in the coming winter due to Beijing ordering low-quality
mills to shut down to curb pollution. [nL4N1KT2MM][nL3N1GE3E3]
    The ongoing strength in China's steel sector, where
production is running at record levels and local consumption has
cut exports of the metal by nearly 30 percent in the first half
of 2017, is helping to boost export margins for Japanese
steelmakers, which ship more than 40 percent of their output
overseas. [nL8N1K841J] [nL3N1KF29P]
    "Beijing's economic stimulus has been bolstering the Chinese
economy and domestic consumption will likely stay solid this
year even after an autumn congress of the Communist Party of
China," Toshiharu Sakae, Nippon Steel's executive vice
president, told Reuters in an interview.
    China's economy grew faster than expected over the first two
quarters, putting it on pace to beat a growth target of 6.5
percent for the year even as Beijing tries to keep the property
sector in check and manage debt risks. [nL3N1K81AY][nL4N1K33RQ]
    Most Chinese steelmakers are making profits, and "Chinese
steel prices will hover near the current level throughout this
year, though I'm a bit anxious about the recent sharp rally,"
Sakae said.
    There is still a big potential threat to steel, however,
from the possibility for U.S. trade restrictions, he said.
    In April, U.S. President Donald Trump's administration
initiated a review of the steel industry that could result in
the imposition of tariffs or quotas on imports if they are found
to threaten national security. [nL1N1KI2FD][nL1N1KO1XJ]
    "If any actions are taken to curb steel imports, it may
prompt retaliation by others. Steel products that lost
destinations will flow into Asia, including Japan, leading to a
collapse of local markets," he said. [nL4N1HW2AD] [nL4N1KN294]

    COKING COAL ANOTHER WORRY
    Sakae was less concerned about iron ore prices spiking
recently as they tracked the rising steel market, he said.
    Last month, the world's fourth-largest steelmaker forecast a
72 percent jump in its recurring profit for the year through
March 2018, saying it could pass higher material costs on to
customers by raising product prices amid healthy demand at home
and abroad. [nL3N1KJ2Y4]
    But Sakae is worried about coking coal prices that rose
unexpectedly after output cuts on strikes and outages in
Australia. [nL3N1KB033]
    "If the disruptions continue, coal prices may rise further
as steel demand in China and India are both strong," he said.

    "Once output issues are solved, prices should head back to
around $160 per tonne," he added.
    Coking coal <SCAFc1> on the Singapore Commodity Exchange was
at $195 per tonne on Wednesday.
    Another major challenge for steel is new competition from
lighter materials.
    Aluminium is increasingly used as a steel substitute to make
lighter cars, part of growing efforts to tackle global warming
and reduce carbon footprints.
    "We are trying to lower weight, cost and environmental
impact of steel, and we believe steel is competitive," he said.
    "But for car makers, using aluminium and carbon fibre is the
fashion, especially for high-end cars."
    One way to fight back is to offer composite materials of
steel and other materials such as carbon fibre or resin.
    "We are considering making light and high-performance
composite materials," he said.

 (Reporting by Yuka Obayashi; Editing by Tom Hogue)
 ((Yuka.Obayashi@thomsonreuters.com; +813-6441-1798; Reuters
Messaging: yuka.obayashi.thomsonreuters.com@reuters.net))

Keywords: NIPPON STEEL CHINA/ (INTERVIEW)



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