Japan Major Steels to Expand Production Cut to 10 Million tonnes Level in 2H

Japanese major 5 steel makers including Nippon Steel and JFE Steel are expected to expand the production cut up to 10 million tonnes in the second half year to March 2009 from the first half year to meet the lower demand and to reduce overstock. Japanese special steel makers also reduce the production significantly when the demand drops sharply in January-March due to slower activity of automobile and construction machinery under worldwide slower economy.

Japanese major 5 makers announced production cut in the second half year due to slowing steel demand. They announced around 2 million tonnes of total production cut as of end of October. They expanded the production cut to around 5 million tonnes in early December. JFE Steel announced the firm expands the production cut from 1.5 million tonnes to 4 million tonnes. Nippon Steel, Sumitomo Metal Industries, Kobe Steel and Nisshin Steel also study for further cut. An executive of major steel maker said the production cut could be around 10 million tonnes for the second half.

Worldwide slower activity in manufacturing and construction impacts on steel production after financial crisis started in USA. Automakers expand the production cut to reduce inventory under sales slump. Construction machinery makers also reduce the inventory and some makers reduce the operation by 80-90%, according to Japanese trading firm source. Private sector cancels and postpones construction projects reducing order for machinery and other equipment.

Japanese special steel makers also reduce the production when the major users of automobile and construction machinery makers cut the production. A top executive of special steel maker said the firm operates at around 50% in January and should keep production cut in February.

Slower steel demand in Asia also impacts on Japanese steel makers’ operation. Japanese steel makers’ export decreases due to the slower demand.

Ministry of Economy, Trade and Industry expects Japanese steel demand will decrease by 9.74 million tonnes to 21.1 million tonnes in crude steel equivalent in January-March from same period of 2008.