Aichi Steel to Reduce Special Steel Output by 5-10% in April-May

Aichi Steel, Japanese major special steel maker, announced on Tuesday the firm will reduce the special steel output for structural purposes, springs and bearings by 5-10% or about 5,000-10,000 tonnes in April-May compared with March when the profitability becomes worse due to higher ferrous scrap cost. The firm decreases the output for the first time since February 2004. Daido Steel also announced output reduction in March. Other special steel makers might follow the movement. Aichi Steel’s output reduction would impact supply and demand balance of special steels. Aichi Steel produces special steel products at approximately 100,000 tonnes per month. The firm commented the output reduction would not impact the users’ production schedules. The firm might continue output reduction in June up to ferrous scrap cost level. Domestic ferrous scrap price exceeded 40,000 yen per tonne for new cutting scrap and increased to around 42,000 yen per tonne currently. The market price is expected to rise more when the export price keeps strong for South Korea. Special steel demand is strong for automobiles, auto components and construction machineries. Aichi Steel will reduce the output with the adjustment of order reception volume from the users. Production costs seem to increase temporarily due to the output reduction. The firm plans to raise the selling price of special steel products such as structural steels by 10,000 yen per tonne. However, the profit improvement may take a while.