Japan Raw Steel Demand to Rise by 1.5% in July-Sep

Japanese crude steel demand will increase by 1.5% to 26.92 million tense in July-September from estimated production in April-June, which increases for the first time in 2 quarters, announced by Ministry of Economy, Trade and Industry on Thursday. The demand of steel products increases at home and abroad when activity of automakers and other manufacturers recover the production level after shock of the major earthquake while limited power supply would reduce the demand in summer period. METI’s director Masaki Koito of iron and steel division said Japanese steel makers should focus on inventory adjustment when the steel inventory reaches warning level.

METI expects the steel demand for automobile increases by 26.8% in July-September from April-June when automobile production recovers both in finished car and knockdown sets thanks to normalizing parts supply chain. The steel demand is 9.8% lower than same period of 2010. The steel demand will keep firm for construction and industrial machinery and electrical machinery due to rebuilding activity for the quake damage and investment by power industry.

METI expects the steel consumption for civil works in July-September from April-June due to the demand season while the steel order for civil works will decrease when the government cuts the budget and holds the 5% budget execution to secure budget for the quake damage rebuilding. The housing steel demand will slightly decrease due to lower temporal housing demand despite of the government support for housing investment. The steel demand for nonresidential building increases for renovation of public building for better earthquake resistance.

The steel export will keep strong mainly for Asia in July-September. METI expects the export increases from April-June from same period of 2010 when quake damaged facility resumed the operation despite of negative factors including higher yen rate and higher export from China.

Mr. Koito said the automobile production increases but the steel demand could decrease due to limited power supply, higher yen rate and higher raw materials cost. He said the steel makers should be cautious on actual demand to avoid overstock. He expects the government’s additional budget creates additional steel demand as early as in October-December.

METI emphasized the inventory is too high when the carbon steel stock held by makers and distributors hit estimated 5.56 million tonnes for domestic market at end of June, which is same level as September 2008 and near recent peak of 5.88 million tonnes in December 2008. METI warns Japanese steel makers should reduce the stock level by adjusting the production to less than actual demand level.

METI expects Japanese raw steel output decreases by 3.6% to 53.45 million tonnes in the first half of fiscal 2011 started April from same period of fiscal 2010. The volume is 3.5% lower than second half of fiscal 2010. The production decreases due to lower demand and lower production at damaged steel making facilities after the quake. The first half production decreases to less than 54 million tonnes as fiscal 2009 and fiscal 2001 compared with the peak of 61.51 million tonnes in fiscal 2008.