Japanese Integrated Steels Should Raise Cost Competitiveness to Survive Severe Circumstances

Japanese steel makers are facing necessity to strengthen cost competitiveness more in order to improve business profitability under historically and continuously strong yen trend. Especially integrated steel makers are impacted not only by strong yen trend but by weakness of Asian steel market price and decrease of steel export due to flood in Thailand.

Japanese quarterly demand for crude steel is forecasted to decrease by 2.3% to 26 million tonnes for January-March compared with the estimated demand for October-December.

Japanese total steel export decreased by 15% to 3.05 million tonnes in November from a year earlier, year-to-year minus for nine straight months. Meanwhile, Japanese carbon steel import increased by 28.8% to 442,800 tonnes in November from a year earlier, y/y plus for 23 straight months. Export is decreasing and import is increasing especially for steel sheet, one of the main items for Japanese integrated steel makers.

Nippon Steel recently shrunk raw steel output capacity as of a blast furnace refinement. JFE Steel has also entered productive adjustment. Japanese integrated steels are also said to be shifting to newest productive facilities in downstream processes such for surface treated steel sheets. Utilization of low cost materials in steel making process and less consumption of reducing materials are important themes as well.

Japanese trader source shows expectations that Asian steel demand keeps healthy growth, that steel demand rebound is expected in 1H 2012 after Thai flood and that steel orders could also increase for reconstructions in the disaster areas of the Japan Earthquake. Meanwhile, competitions have rather severed with Chinese and South Korean steel makers. Japanese steel makers cannot gain sales volume and profits without improvement of cost competitiveness.