Japan Tighter Automotive Steel Supply

Japanese steel supply gets tighter for automobile industry. Japanese automakers revise the domestic output plan around 11.8 million units for finished car and around 8.7 million units for knockdown sets for fiscal 2007 ending March 2008, which is around 300,000 units higher for finished car and around 800,000 units higher for knockdown from previous year. The output level is higher than domestic integrated steel makers’ outlook at maximum 11.6 million units of finished car and around 8 million units of knockdown despite some negative factors including slower domestic auto sales, potential slower auto export under higher yen rate and higher oil price. The steel makers try to increase the steel supply for automobile industry to meet strong demand. Japanese automobile output decreased by 0.9% to 5.479 million units in April-September from same period of 2006, according to Japan Automobile Manufacturers Association. The lower output was due to production loss under impact by major earthquake in Niigata. The output increased by 6.8% to 3.135 million units for export while the output for domestic market decreased by 8.5% to 2.356 million units. Domestic automakers try to increase the output in second half to cover the slower output in the first half and increase the export. The domestic auto sales shows sign to recover due to new models launching when the domestic registration increased by 2.0% to 269,000 units in October from a year earlier, which was first increase in 28 months. Japanese steel makers expected the domestic automobile output is 5.5 million units in the first half and 6.1 million units in the second half. Some steel makers revised the expectation downward by around 100,000 units for the full year due to output loss from earthquake in July. However, the steel makers try to increase the steel supply for automobile when the automakers’ output level could increase more. The steel makers also increase the supply for auto parts for offshore automobile plants when Chinese automobile output increased by 22.8% in January-September along with strong demand in Thailand. Nippon Steel, JFE Steel and Sumitomo Metal Industries launched new continuous galvanizing lines to increase the supply. They now operate the new lines at full capacity operations after the speedy pumping up. The automobile steel supply is likely to get tighter in January-March when automakers increase the output normally.