* Plans to raise product prices again in FY17/18
* Expects coking coal prices at $150-200/T, iron ore at
* Worries over Trump policies have not gone away
By Yuka Obayashi and Ritsuko Shimizu
TOKYO, Feb 16 Nippon Steel & Sumitomo Metal,
Japan's biggest steelmaker, expects steel prices in top consumer
China to hold firm at least until its Communist Party congress
late this year, amid solid demand that is underpinning coking
coal and iron ore markets.
Chinese futures contracts for steel reinforcing bars
used in construction have already risen 17 percent in
2017, on top of a gain of more than 60 percent last year.
Besides sustained demand for construction activity, Beijing is
forcing steel producers to cut output as it wages its war on
smog, raising worries about supply.
"Steel demand and prices in China have been fairly strong on
the government's stimulus," Nippon Steel executive vice
president Toshiharu Sakae told Reuters in an interview.
"I expect this trend to continue for a year as Beijing will
work hard to support its economy ahead of the Congress," Sakae
said, referring to China's 19th Communist Party Congress that is
expected to be held late in the second half of 2017.
To pass on the resulting higher materials costs, Nippon
Steel - the world's third-largest steelmaker by output in 2015 -
wants to raise product prices in the financial year starting in
"My guess is that coking coal prices will stay at $150-200 a
tonne as China is said to be trying to cut market volatility,"
he said, adding that iron ore prices may move towards $90 a
tonne on a free-on-board basis on hopes that China's imports
China's iron ore futures hit their highest in more than
three years this week, amid solid steel demand.
To offset rising costs, Nippon Steel has sought to increase
product prices by around 20,000 yen ($174.73) per tonne this
financial year, but will need more hikes next year, Sakae said.
The high materials costs have squeezed margins and it is
difficult to make the capital expenditure needed to maintain
high quality and the swift delivery of products, he said.
The company's iron ore term contracts for April-June quarter
are expected to come at around $77-78 a tonne, up from $57 this
quarter, Sakae said.
Raising its product prices would help improve its
performance in the upcoming 2017/18 financial year. The company
has predicted its recurring profit will likely fall 35 percent
in the year to March 31 due to materials price gains that have
outpaced the steel price increases.
Sakae, who has warned that worries over U.S. President
Donald Trump's protectionist policies are "growing every day",
said the recent friendly meeting between Trump and Japanese
Prime Minister Shinzo Abe has not eased his concerns.
"If the U.S. takes measures that affect the Japanese auto
industry, it will indirectly hurt our business," he said.
($1 = 114.46 yen)
(Reporting by Yuka Obayashi and Ritsuko Shimizu; Editing by