Quake, Tight Power Supply to Cuts Japan Steel Output for Months

Japanese steel makers cannot fix production and sales plan in and after April due to uncertain demand condition and power availability controlled blackout plan by Tokyo Electric Power Company (TEPCO). Japanese raw steel output is likely to be less than 28 million tonnes in January-March due to more than 500,000 tonnes of production cut after the major earthquake while the quarterly production was expected to reach 28 million tonnes for the first time in 3 quarters. The quake damage could impact on the steel production in and after April.

Ministry of Economy, Trade and Industry usually releases in late March steel demand outlook for April-June. However, METI doesn’t release the outlook this time when the ministry cannot figure out the situation due to tremendous damage on the steel industry and whole economy.

The demand is uncertain when automakers have to reduce the output due to damage on parts makers by the quake. Other industries including shipbuilding and construction machinery makers also have to reduce the operation due to damage on the plants and related companies. Higher yen rate also impacts on steel consuming industries while higher raw materials cost impacts on steel and steel using industries.

The steel supply is also impacted by the quake. Many electric furnace steel makers keep suspending the operation after the quake. Many of electric furnace steel makers around Tokyo resumed the operation but they have to reduce the output by up to 30% due to the blackout program. Nippon Steel’s Kimitsu works and JFE Steel’s East Japan works already resumed the operation earlier but they try to cooperate to energy saving by reducing the operation level. Sumitomo Metal Industries’ Kashima works resumed blowing to 2 blast furnaces by Saturday but the works takes more time to normalize the raw steel output. The quake impact and blackout program is expected to reduce the raw steel output by more than 500,000 tonnes in March.

Japanese raw steel output was 18.59 million tonnes in January-February including 9.66 million tonnes in January and 8.93 million tonnes in February. The daily output was around 320,000 tonnes in February. Without the quake, the output was expected to reach 9.9 million tonnes in March and 28.5 million tonnes in January-March, which was higher than 28.4 million tonnes of production plan by the makers as of early February.