Japan Raw Steel Output to Hit 40-Year Low in January-March

Japanese raw steel production could decrease to less than 20 million tonnes in January-March when the integrated and electric furnace steel makers expand the production cut to reduce steel inventory under slow demand caused by world recession. The production could be 40-year low after 18.28 million tonnes in January-March 1969.

The raw stele production reached 110 million tonnes in fiscal 2003 ended March 2004. The output kept increasing year after year and hit record 121.51 million tonnes in fiscal 2007. The quarterly production was high level and kept more than 30 million tonnes from October-December 2007 to July-September 2008.

However, the quarterly production deceased to 26.39 million tonnes in October-December 2008 due to world recession impact on steel demand. Ministry of Economy, Trade and Industry expected in December the steel demand in raw steel could decrease to 21.1 million tonnes in January-March 2009 due to slower demand at home and abroad and inventory adjustment.

The demand condition gets worse in January when major steel using industry including automobile and construction and industrial machinery expand the production cut to meet slower demand and to reduce their inventory. The foreign exchange rate of yen keeps higher than other currencies impacting on the export competitiveness.

An official of integrated steel maker said the raw steel output could decrease to less than 20 million tonnes in January-March if the steel makers’ production cut would meet the level of the users’ output reduction.

JFE Steel and Nippon Steel expanded the production cut to 4 million tonnes and more than 4 million tonnes respectively in October-March period. The major 5 steel makers’ production cut could reach more than 10 million tonnes in the period when Sumitomo Metal Industries, Kobe Steel and Nisshin Steel also revise the production plans to expand the cut.

The 5 major steels started the production cut in November and expanded the cut in December and the cut again in January. Japanese electric furnace carbon steel makers expand the production cut to 50-80% from 30-50% in October-December while major electric furnace special steel makers enter into around 50% production cut.