JFE Steel Corp has agreed on a 65 percent hike in the prices of iron ore it procures in fiscal 2008 from a major Brazilian metals and mining company compared with a year ago.
Masamoto Tazaki, chairman of the Shipbuilders' Association of Japan has described the agreement as 'shocking'. 'We do not know if the steel makers will shift their entire increase in costs to the price of their products, but it seems that this increase will end up being absorbed by all other industries such as the shipbuilding, automobile and machinery industries. ' He added that, 'While other industries can quickly reflect the increased costs in the prices of their products, only the shipbuilding industry, where the ship prices are determined in advance, has no capacity to absorb the increased costs. 'Another issue we need to tackle is to devise the structure of contracts that can slide along with the costs. Amid the speedy development all over the world, the shipbuilding industry will not survive if we do not do this,' adding that, 'We hope to veer away from high-risk, low-return businesses and shift to middle-risk, middle-return businesses instead.'
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