Japanese Steel Makers Concerned about Double Dip in Early 2010

Japanese steel industry is concerned about double dip recession in or after January. The demand for steel products may turn down when each country’s economy stimulus packages end. On the other hand, Chinese steel supply capacity got overabundant. Japanese domestic demand for crude steel, including the export, is expected at 25.28 million tonnes for October-December with the possibility to reach 100 million tonnes for 12 months of fiscal 2009 ending in March 2010, according to Ministry of Economy, Trade & Industry. However, the demand may become lower than expected.

Domestic steel demand has shrunk from civil engineering by governmental readjustment of public projects. New housing and building starts also keep low with private companies’ slow investment and employment instability. The demand from manufacturing industry has slightly rebounded thanks to the governmental stimulus measures. Shoji Muneoka, chairman of Japan Iron & Steel Federation, said the demand hasn’t entered the self-sustaining recovery stage yet.

An executive officer of Japanese integrated steel maker said the demand is steady for building materials in China and the sales of automobiles and machines are rebounding. Asian steel market is firm, he said, but there is a back action when many governmental stimulus measures finish within 2009.

Chinese crude steel capacity is expected to reach 720 million tonnes at the end of 2009, up from 660 million tonnes at the end of 2008. Japanese large dealer source said Chinese small-middle steel makers could survive shakeout while new integrated iron works would enter commercial operations in 2010, though Chinese output is increasing despite of weak demand and the market price is declining with increasing inventories.