Tokyo Steel Manufacturing Co is relocating output to deal with rising power costs in the wake of last year's nuclear disaster.
The company's president, Mr Toshikazu Nishimoto, said that higher electricity tariffs will push up costs for an industry already burdened by weak domestic demand, overcapacity and a strong yen.
He said that the company will shift output from its Kyushu mill to its operation in Okayama in the southwest of Japan's main island, an area where rate increases aren't planned.
He said that "Looking at the future, this issue will be serious for the industry."
The shuttering of most of Japan's nuclear reactors after last year's Fukushima disaster has forced utilities to turn to alternative energy sources and pay a higher price for fuel. Kyushu Electric Power, which supplies Japan's southern island, plans to increase electricity prices by 14% for corporate customers from April 2013.
Mr Nishimoto said that the proposed increase will raise power costs by as much as JPY 800 million (USD 9.6 million) a year, or about JPY 1,000 per metric tonne of steel. The company's electricity bill accounts for as much as 30% of its production costs.
Mr Hiroshi Tomono, chairman of the Japan Iron and Steel Federation, said that Japan's steel industry faces an increase in costs of as much as JPY 100 billion annually due to rate increases, which will especially hurt the smaller mills that operate electric furnaces.
Mr Nishimoto said Japan's electric furnace steelmakers would need to consolidate regionally to boost their competitiveness against South Korean rivals. Tokyo Steel itself isn't considering any mergers or takeovers because it doesn't see any rivals that would make for a compelling fit.