Bloomberg reported that Kobe based Kawasaki Heavy Industries Ltd, Japan third largest maker of heavy machines, may buy steel plates from China and South Korea for the first time to build ships if domestic prices rise too much.

Mr Nobumitsu Kambayashi president of Kawasaki Heavy shipbuilding unit said “We wouldn’t deny the possibility of using imported steel. If we fail to agree with domestic mills on prices and we find overseas made steel offers an advantage in terms of quality, delivery and price, we will have to turn to it.”

Mr Kambayashi said Kawasaki venture with China Ocean Shipping Group Co in Nantong, eastern China has already purchased a small amount of steel for use in vessel handrails and stairs from Shanghai based Baosteel Group Corp on an experimental basis. Like Kawasaki’s domestic shipyards, the Chinese venture buys higher performance plates produced at Japanese mills including JFE.

He said that price negotiations for the six months to September 30th may drag on for another month. He said that to curb costs, Kawasaki Shipbuilding is also seeking to use futures to hedge against price volatility of steel plates. Vessels are typically delivered to customers about three years after contracts are signed, making it hard for shipyards to pass higher costs onto buyers if prices fluctuate.

He added that “We’d like to make use of futures if we can.”

Kawasaki comments come as Nippon Steel Corp and JFE Holdings Inc press customers to accept higher prices because of the increased cost of iron ore and coal, two key steelmaking raw materials. The move underscores the rising competition Japanese steelmakers’ face from China, whose five largest mills overtook Nippon Steel in terms of production last year displacing it from its slot as the world second largest steelmaker.

(Sourced from Bloomberg)