TOKYO — Prices for architectural steel in Japan have risen to the highest levels in more than a decade as Russia’s invasion of Ukraine disrupts supply chains for a wide range of building materials, including wood and cement.
Tokyo Steel Manufacturing on Tuesday raised the price of H-beams used in building construction to the most in more than 13 years, 121,000 yen ($1,000) per ton. Kyoei Steel announced a 7% price hike for steel rebar.
With steel proving too hot to handle, companies are starting to postpone increasingly costly capital investments, which could have knock-on effects on the broader economy if the trend continues.
Russia and Ukraine together accounted for roughly 11% of global steel exports in 2020, according to data from the World Steel Association. Production facilities in Ukraine have been shut down, and one of Europe’s largest steel works, located in the besieged city of Mariupol, has suffered heavy damage.
The steep increase in H-beam prices reflects a 20% jump in the price of scrap steel — used to feed electric arc furnaces like Tokyo Steel’s — between the start of the year and mid-March.
Prices for stainless steel used in building roofs and walls have reached a nearly 14-year high and are expected to keep climbing, as they have not fully absorbed nickel’s dramatic rally this month.
Nippon Steel Stainless Steel and Nippon Yakin Kogyo, Japan’s two top manufacturers of stainless steel, stopped signing new spot contracts early this month. “We had never had a halt of a week or more in the last decade,” a Nippon Yakin representative said.
The impact of the Ukraine war extends beyond steel to materials like lumber that had already grown costlier amid pandemic-related disruption. Market prices for Japanese-made softwood plywood, used in walls and floors of homes, have climbed for five straight months in Tokyo to a record high.
About 60% of Japan’s imports of wood veneer — the thin layers used to make plywood — came from Russia last year. Moscow has banned exports of some forestry products, including veneer, in retaliation for sweeping economic sanctions against the country, and the resulting hit to supply is expected to send prices even higher.
The cement industry has been hit soaring prices for coal, of which Russia is a major producer. Cement makers are negotiating with customers to pass on these higher costs. Nomura Securities estimates that hikes of 3,000 yen to 4,000 yen per ton will be needed if coal prices stay at their current level.
The Bank of Japan’s corporate goods price index for construction materials jumped 18% on the year last month to an all-time high and is expected to keep rising.
Materials make up 50% to 60% of the cost of construction projects, a factor in companies’ plans for factory investment.
Building materials maker Daiken has postponed construction of a planned fiberboard factory in Hokkaido, as the cost of the project has ballooned to roughly 12 billion yen, or about $100 million — nearly double the initial estimate — on higher steel prices.
The company says it plans to make a final decision in fiscal 2023 or later.