Japan Electric Furnace Steels’ Operation Hits Historical Low

Japanese electric furnace steel makers’ operation rate drops to historical low. The electric furnace special steel production decreased by 46.3% to 392,000 tonnes in December from a year earlier, which decreased for 4 months in a row and hit the lowest level since January 1976. The electric furnace carbon steel output decreased by 37.6% to 1.181 million tonnes, which decreased for 3 months in a row and hit the lowest level since January 1978. The operation keeps low in and after January when major production cut by automakers and construction machinery makers impacts on the operation of special steel makers while slump for domestic construction demand and slow export market reduce carbon steel operations.

The electric furnace special steel production increased since 2003 due to higher production of automobile and construction machinery keeping around 700,000 tonnes per month of production since October 2007. However, the production dropped to less than 600,000 tonnes in November due to production cut by automakers and construction machinery makers after financial crisis. The production decreased to less than 400,000 tonnes, which represented around half of the peak of 766,000 tonnes in June 2008. The special steel makers expand production cut in and after January due to slower demand when automakers and construction machinery makers accelerate the production cut to meet low level demand and to reduce inventory.

The electric furnace steel makers kept 1.6-2 million tonnes of monthly production in recent years. However, the production decreased by more than 10% in October and November from a year earlier level due to slower domestic demand and export market. The production dropped to less than 1.2 million tonnes in December. The demand for private sectors’ construction investment, which was expected to support the steel demand, keeps decreasing due to the recession. The carbon steel makers keep low level operation in and after January when the buyers wait lower price with minimum purchase.

Japanese electric furnace steel production decreased by 4.7% to 29.5 million tonnes in 2008 from 2007. The production decreased by 5% to 21.41 million tonnes for carbons steel and by 4.1% to 8.081 million tonnes for special steel, according to Non-Integrated Steel Producers’ Association. The production hit first drop in 3 years for carbon steel and in 6 years for special steel due to major drop in October-December.