Quake to Cut Japan Raw Steel Output in April-June

Japanese raw steel output decreases by 2.8% to 26.898 million tonnes in April-June from estimated production in January-March, which is the first drop in 3 quarters, announced by Ministry of Economy, Trade and Industry on Monday. The production decreases when the steel using industries including automobile chain reduce the activity after the major earthquake.

METI recognizes Japanese steel makers recovered from the quake damage earlier than other industries and the steel industry keeps the stable supply with several % of production decrease. However, METI also warns the steel industry should adjust the production to uncertain demand situation at home and abroad.

The domestic steel demand usually increases in April-June from January-March. However, the steel production will decrease in April-June due to slower demand for manufacturers including automakers and construction machinery makers with damage by the quake while the steel making capacity decreased due to damage on some steel plants. The raw steel output represents 4.2% lower than same period of 2010.

The output of steel products is 22.908 million tonnes in April-June, which is 5.6% lower than January-March and 6.0% lower than same period of 2010. The output of carbon steel products for domestic market decreases by 5.1% to 11.41 million tonnes. The production decreases especially for sheet steel under automakers’ production cut. The production increases for sheet pile, H-beam and small bar when METI requested stable supply for rebuilding activity in the damaged area.

The output of carbon steel for export decreases by 1.6% to 6.94 million tonnes in April-June from January-March. The sheet steel production decreases when part of the sheet supply is in recovery stage from the quake damage and higher yen rate reduces the export along with potential production cut by transplants of Japanese automakers. The electric furnace steel H-beam makers reduce the export to secure domestic shipment.

Japanese automobile output will recover gradually toward second half of fiscal 2011 ending March 2012. The rebuilding demand will start to impact on the steel demand in and after the summer when the government launches first batch of the extra budget. However, METI warns the steel industry should watch the increasing steel inventory through the supply chain.

Japanese output of special steel products decreases by 15.1% to 4.548 million tonnes in April-June from January-March, which is the first drop in 9 quarters. Lower demand for automobile and construction machinery impacts on the steel production while the steel export decreases due to lower shipment for offshore projects and damage on the makers. The production represents 10.7% lower than same period of 2010.

The output of special steel products for domestic market decreases by 17.6% to 2.806 million tonnes in April-June from January-March. The output for export decreases by 10.8% to 1.742 million tonnes. The output decreases by 6.9% to 718,000 tonnes for stainless and by 16.5% to 3.83 million tonnes for other items.

Special steel has longer supply chain than carbon steel. The makers should be cautious to keep supply balance when the downstream players including processors and parts makers would have higher steel inventory than usual.