Nippon Steel Corp., the world's second-biggest steelmaker, expects iron ore suppliers including BHP Billiton Ltd. and Rio Tinto Group to delay price talks as financial turmoil damps the outlook for steel demand.
The global economy is "at the peak of chaos," Nippon Steel President Shoji Muneoka said Friday. Contract negotiations for the year starting April 1 traditionally begin by this month between Asian steelmakers and ore miners.
A widening credit crunch has stymied demand for cars, ships and buildings, prompting mills to cut output and spurring expectations iron ore prices will drop from a record. UBS AG forecasts a decline next year of 40 percent.
"We cannot forecast steel demand until the credit crunch and big fluctuations in stock prices and foreign-exchange rates stabilize to some level," Muneoka said. "We may need to cut production further."
Japan's crude steel output will probably drop to 110 million metric tons in the year starting next April 1, 8.3 percent less than the 120 million tons forecast for this fiscal year, Atsushi Yamaguchi, an analyst at UBS AG in Tokyo, wrote.
"We normally start preliminary talks over prices in November, but this year we can't because the steel market's chaotic situation has just started," said Tooru Obata, a general manager at Nippon Steel.