JFE Steel Cuts Raw Steel Output by 1.5 million tonnes in 2H

JFE Steel decided to reduce the raw steel output by 1.5 million tonnes in the half year to March 2009 from the first half, which is 1 million tonnes more production cut compared with announced 500,000 tonnes as of October. The firm adjusts the output when domestic automakers reduce the production plans one after another and the demand gets slower. The president Hajime Bada said the firm would reduce the output more if the condition would get worse. The slower demand than expected could result in further output reduction for other domestic integrated steel makers.

JFE Steel announced 500,000 tonnes of output reduction for the second half year from the first half when the parent firm announced the half year results in October. JFE Steel expected lower stainless demand and slower automobile production. However, automakers revised the production plan downward significantly and the firm decided the additional output reduction when the carbon steel sheet demand should decrease more than expected.

The raw steel output will decrease to around 14 million tonnes for the second half while the firm originally planned same level as 15.49 million tonnes in the first half. The production will be around 29.5 million tonnes for the fiscal 2008 ending March 2009, which is lower than 30.52 million tonnes in fiscal 2007. The output decreases for the first time in 3 years and is less than 30 million tonnes for the first tine in 2 years.

Mr. Bada said the situation is changing and gets worse gradually. He said the priority is to adjust the production to the demand level. The firm tries to watch the demand condition carefully eyeing additional output reduction.

Japanese automobile output was expected to reach 12 million units in fiscal 2008 compared with 11.8 million units in fiscal 2007. However, automakers reduce the output significantly when the sales dropped sharply since the summer at home and abroad. The domestic automobile output is now expected to be around 11 million units in fiscal 2008.