Quake Impacts Electric Furnace Carbon Steel Makers

Japanese electric furnace carbon steel makers started the new fiscal year from April under severe business condition just after the major earthquake. The makers have to cope with many issues sharp demand drop caused by the quake, limited availability of power supply and ferrous scrap with radioactive pollution while the government starts obligation purchase system for renewable energy in fiscal 2012 starting April 2012. Chairman Katsutoshi Kurikawa of Japanese Non-Integrated Steel Producers’ Association said to a reporter of Japan Metal Bulletin the quake changed the steel market drastically mainly in eastern Japan. The president of Godo Steel said the industry should focus on stable supply of steel products for rebuilding of damaged area by the quake.

Mr. Kurikawa said construction activity is very slow in Tohoku due to limited availability of materials and manpower while construction activity slows for some projects around Tokyo. He expects the rebuilding demand will increase for products of the electric furnace carbon steel makers only when the rebuilding activity starts while the steel demand increases for processed sheet steel mainly for temporary houses. He said the industry should prepare for the stable supply to support the rebuilding activity.

Mr. Kurikawa emphasized industrial power consumption represents only less than 30% in areas covered by Tokyo Electric Power Company (TEPCO) while power consumption of commercial use and general consumers and others represents more than 70%. He said the energy saving in individual household is the key factor to reduce peak power consumption toward power consumption peak in summer. He said the industry is willing to cooperate for the energy saving by rescheduling products shipment and scrap acceptance in daytime while the main operation is mainly night.

Mr. Kurikawa emphasized the steel makers have each standard to screen radioactive level of scrap at the plants based on the guideline by Japan Iron and Steel Federation. He said the steel makers check the radiation level for export depends on standard in each destination country when many countries have different standards including 0.4 micro Sv in China and 0.2 micro Sv in Taiwan.

Mr. Kurikawa expects construction steel demand is very low in Tohoku area in the first half of fiscal 2011 while the demand is firm for condominium construction around Tokyo and the western areas. He expects concrete reinforcing steel bar demand will increase by around 5% in the first half in total Japan from same period of fiscal 2010 while the demand decreases. He said the demand will increase in Tohoku through fiscal 2011 from fiscal 2010.

Mr. Kurikawa said the industry should consolidate further to improve the competitiveness. He expects surviving companies with annual 1 million tonnes or larger production volume and 24 hours full capacity operation would have better international competitiveness.