Japan Steel Demand to Drop by 3.2% in Jan-Mar, METI

Japanese steel demand will decrease by 3.2% to 26.88 million tonnes in raw steel output in January-March compared with estimated raw steel output in October-December, which decreases for the first time in 2 quarters, announced by Ministry of Economy, Trade and Industry on Monday. METI expects the raw steel output will decrease due to higher semi-finished steel output in October-December and inventory adjustment. METI warns the steel inventory is higher for the demand level and the stock level should be the level at the end of March 2010. The director of iron and steel division Masaki Koito said Japanese steel makers should reduce the output to reduce the inventory to normal level under the higher risk factors including potential downward trend in offshore steel market, higher output capacity for Asian steel makers and higher yen rate.

METI expects carbon steel inventory at the makers and distributors is 6.23 million tonnes at end of December, which represents 1.27 months of the shipment as end of September. METI sees the inventory is high level for the demand due to higher raw steel output than the demand in October-December. METI shows expectation for domestic steel makers to reduce the output. With the output reduction, METI estimates the inventory will decrease to 5.94 million tonnes at end of March 2011 compared with 5.85 million tonnes at end of March 2010.

The steel demand in January-March will increase by 0.2% to 24.22 million tonnes from October-December, which is the first increase in 2 quarters thanks to high level export to Asia. METI expects domestic manufacturers use more steel products toward fiscal yearend as usual. METI expects automotive steel demand will recover while the demand decreased in October-December after subsidy end for eco-friendly vehicle and steel consumption keeps high level for construction and industrial machinery.

METI expects domestic steel demand will decrease by 1.6% in January-March from October-December, which is decreases for 2 quarters in a row, when construction demand decreases by around 7% usually in January-March from October-December due to snow season for northern Japan. METI expects steel export will increase by 3.4% in January-March from October-December, which increases for 2 quarters in a row despite of higher yen rate thanks to strong offshore demand.