Japan Special Steel Output to Keep High Level in 2H F2010

Japanese integrated steel makers expect they can keep high level production of special steel in second half of fiscal 2010 ending March 2011 as the first half when Japanese finished car and automotive parts will keep strong. The makers expect strong offshore demand covers potential lower domestic demand when subsidiary will finish for eco-friendly vehicle purchase by end of September. The makers expect the demand for construction and industrial machinery will keep strong mainly due to offshore demand. However, the steel makers concern higher yen rate, which could reduce their profitability.

Japanese automakers produced around 20.1 million units of automobile in 2009, in which they sold around 4.4 million units or 22% in Japan. Toyota Motor will reduce the output by around 15% in October-November from September but the reduction could be less than 5% for global basis while the domestic production would decrease by 20%. Japanese integrated steel makers expect such output reduction couldn’t reduce special steel demand heavily when Toyota will increase the production in January-March after adjustment in October-December.

Japanese construction machinery shipment increased to 2.5 times for offshore buyers in June from a year earlier and the total shipment increased by 87%, which increased for 6 months in a row. The industrial machinery order receipt doubled in June. Japanese integrated steel makers expect the machinery production increase in the second half of fiscal 2010 from the first half.

Japanese output of special steel products increased by 5.6% to 5.09 million tonnes in April-June from January-March. The output was 1.9 times higher than a year earlier. The sales increased by 3.9% from January-March, which increased for 5 quarters in a row. The production is same level in July-September as April-June.

Yen rate hit less than 84 yen per US dollar temporarily last week. The higher yen rate at around 3% in a month and around 10% from April reduces Japanese cost competitiveness. Japanese integrated steel makers concern the users’ lower export due to higher yen rate.