TOKYO: Japan’s crude steel output for July-September is expected to fall 6.1 percent from a year earlier to the lowest for the quarter in six years, scoring a fourth straight quarterly year-on-year drop, the trade and industry ministry said on Friday.
The decline counters the Bank of Japan’s closely watched “tankan” survey which showed an improvement in business mood on Wednesday, adding to fears of a slowdown in economic activity.
The ministry predicted crude steel output would sink to 26.18 million tonnes in July-September, the lowest output for the quarter since 2009 when steel demand was hit hard by the global financial crisis. April-June output also hit a six-year low for the quarter.
“Civil engineering and automobile sectors have been languid, which weighed on steel demand,” Takanari Yamashita, director of METI’s iron and steel division, told a news conference. “Steelmakers have slashed output to cut mounting inventories, but the stock remains high,” he said.
Japan’s inventories of ordinary steel products for the domestic market were estimated at 5.78 million tonnes at the end of June, which is worth 1.58 months of domestic supply. Inventory worth 1.2 months of supply is seen healthy, according to industry sources.
Plunging demand for energy-related steel products such as drilling pipes and linepipes in the wake of tumbling oil prices was also hitting export demand, Yamashita said.
Demand for steel products including those for export in the July-September quarter is expected to decrease 3.4 percent from a year earlier, the ministry said, citing an industry survey. Exports are expected to skid 5.0 percent.
“Inventory adjustment is taking longer than we had anticipated due to a slower-than-expected recovery in automobile sales,” a top executive at a Japanese major steelmaker said earlier this week, saying that production cuts will continue through August, instead of his earlier estimate of June.
Faced with stubbornly high inventories and tumbling export prices, Japan’s top steelmaker, Nippon Steel & Sumitomo Metal , slashed its crude steel output by 9 percent in April-June from the previous quarter while second-ranked JFE Holdings cut its output by 4-5 percent.
Against the April-June quarter, crude steel output for the current quarter will rise 1.1 percent, METI said.
Koji Kakigi, the chairman of the Japan Iron and Steel Federation, in May cut his forecast of the country’s crude steel output this year to 107-108 million tonnes from his earlier forecast of around 110 million tonnes.
