Japan Raw Steel Output to Rise by 4.3% in April-June

Japanese raw steel production will increase by 4.3% to 27.652 million tonnes in April-June from January-March, announced by Ministry of Economy, Trade and Industry. The quarterly production level represents around 90% of the peak in April-June 2008 and the highest level after Lehman shock. The production level is annualized 110 million tonnes, which is the first 100 million tonnes level in 3 years. However, Japanese steel makers should adjust the production level flexibly depending on the market condition at home and abroad under uncertainty including heavy dependent on offshore demand and speculative steel demand with expectation for higher raw materials cost and higher steel price.

The raw steel production increases in April-June from more than 26 million tonnes in October-December 2009 and January-March 2010 and 5.7% higher than demand outlook in April-June estimated by METI. The higher production is partly due to a maker’s production recovery from blast furnace trouble.

The recovery is mixed depending on the market sectors. The carbon steel production in April-June is 0.9% lower for domestic market than January-March and around 75% level of April-June 2008. The export keeps increasing from the bottom in January-March 2009 and the export rate reached around 40% of the production.

The integrated steel makers’ production of carbon steel products for domestic market in April-June will increase for plate to construction machinery, which is active for export to Asia, while the sheet steel production decreases by 5.1% to automobile seasonally. The electric furnace steel makers’ production of carbon steel products for domestic market increases by 8.2% seasonally but METI estimates the production includes speculative demand for concrete reinforcing steel bar. The production for export will increase mainly for sheet steel to automobile and appliances applications in Asia.

METI warns the production in April-June could be higher than actual demand when domestic economy is still on the way to sustainable recovery while steel buyers try to build inventory before higher raw materials cost pushes steel price. METI concerns overproduction without flexible production adjustment.

Japanese production of special steel products will decrease by 2.3% to 4.731 million tonnes in April-June from January-March due to seasonal slow demand for manufacturers while strong demand for structural steel bar to construction machinery supports the production level. The production level is 84% of April-June 2008 despite of the major jump from a year earlier level.

The production for export is strong for automobile industry in April-June. The production decreases by 3.5% for high tensile steel and by 1.9% for structural alloyed steel due to delivery delay for energy projects. The stainless flat steel production increase by 0.9% with speculative demand under higher nickel ingot market.