Japan Electric Furnace Steel Output Hits 30-Year Low in F2008

Japanese electric furnace steel makers’ raw steel production is estimated to decrease to less than 24 million tonnes in fiscal 2008 ended March 2009 for the first time since fiscal 1978 due to sharp demand drop under worldwide recession since late 2008. The output apparently decreased by more than 20% both for carbon steel and special steel due to construction demand slump and conservative purchase of the buyers for carbon steel and major production cut by automakers and construction and industrial machinery makers for special steel. The output could decrease more in fiscal 2009 when the makers are in historical wide production cut.

The carbon steel makers’ output kept more than 20 million tonnes per year in years. However, the production decreased sharply since late 2008 when the buyers held the order along with slump for construction demand. The raw steel output decreased by 40.2% to 1.074 million tonnes in February from a year earlier. The output was 15.919 million tonnes for 11 months through February. The output is estimated to around 17 million tonnes for fiscal 2008, which was 24% lower than fiscal 2007, when the output in March was same level as February.

The output of electric furnace special steel makers had increased to 8.49 million tonnes in fiscal 2007 from 6.8 million tonnes in fiscal 2001 due to increasing production by automakers and industrial and construction machinery. However, the steel makers started major production cut since late 2008 when the users’ sales dropped sharply. The special steel makers’ raw steel output decreased by 68.9% to 224,877 tonnes in February from a year earlier. With low level output in March, the production is estimated to decrease by 22% to 6.65 million tonnes in fiscal 2008 from fiscal 2007.

The electric furnace steel makers’ output could decrease by near 20% in fiscal 2009 from fiscal 2008 at the worst scenario. The production could decrease even to less than 20 million tonnes when the demand is expected not to recover high level as before while the users recently start to increase the production slightly.

Japan has 40 electric furnace carbon steel makers and 6 electric furnace special steel makers. The makers could have to consolidate when the demand drop would force then to compete severely.