Japan Raw Steel Demand to Drop by 4.3% in July-Sep

Japanese raw steel demand to meet steel products shipment will decrease by 4.3% to 26.82 million tonnes in July-September from April-June, which decreases for the first time in 2 quarters, announced by Ministry of Economy, Trade and Industry on Tuesday. The demand will decrease by 0.6% to 23.83 million tonnes for steel products, which decreases for 2 quarters in a row. METI expects the domestic demand will increase while the export decreases with adjustment in Chinese market and higher yen rate. METI warns Japanese steel industry should be cautious for potential downside risk and increasing inventory when the demand is uncertain for automobile and Chinese market in the second half of fiscal 2010 ending March 2011 while East Asian steel supply could increase with higher output capacity in the area.

Japanese steel demand will increase by 2.4% for domestic market in July-September from April-June, which increases for the first time in 2 quarters, due to firm production activity by automakers and construction machinery makers. However, the steel export will decrease by 5.4%, which hits first drop in 6 quarters. The offshore demand slows recently when Chinese automobile output decreased for 2 months in a row through May. METI expects Japanese steel export will decrease under higher steel inventory and decreasing market price in China along with higher yen rate.

METI estimates Japanese steel demand increases by 2.2% to 23.96 million tonnes in April-June compared with original outlook due to higher demand for automobile and construction machinery. However, domestic steel stock increases. METI emphasizes it is time to reduce steel stock for Japanese steel industry when inventory for steel products made by electric furnace steel makers increases under decreasing ferrous scrap market while sheet steel stock also increases.

METI expects the demand will increase for all applications except for shipbuilding for July-September from April-June. The demand will increase for automobile, industrial machinery and civil works and buildings. METI expects the steel consumption by automobile industry will increase only by 0.2% when stimulus package for environmental friendly vehicle will expire by end of September while domestic automakers revised the production plan upward. METI expects Japanese steel makers will adjust the production and sales volume with potential downside risk for offshore demand when construction machinery demand could decrease for China and emerging countries.

METI expects special steel demand in hot rolled products will increase by 1.6% to 4.85 million tonnes in July-September from April-June, which increases for the first time in 2 quarters. The demand will increase for major applications of automobile and construction machinery while the export demand increases for many items.

The special steel demand will increase for all items except for tool steel in July-September from April-June when the demand increases by 3.3% for carbon steel for machine structural use and by 2.5% for alloy steel for machine structural use. The export increases by 4.7% for high tensile steel while the stainless flat steel export decreases under lower market price with adjustment of nickel ingot price at London Metal Exchange. The special steel total export will increase by 0.6%.