Japan Raw Steel Production could Hit Historical Low in F2009

Japanese steel makers started fiscal 2009 ending March 2010 under severe business condition. The raw steel production is expected to be less than 100 million tonnes for the year for the first time in 10 years. Some industry interests estimate the production could be less than 90 million tonnes. The makers try to improve the technology and develop new products while they try to secure profit under very low capacity utilization.

The raw steel production reached 31.06 million tonnes in April-June 2008, which is higher annualized pace than record production of 121.51 million tonnes in fiscal 2007. However, Ministry of Economy, Trade and Industry expects the production will be only 17.83 million tonnes in April-June 2009, which is 40-year low. The production could be historical low in fiscal 2009, even less than 88.44 million tonnes in fiscal 1971.

Japanese steel market price keeps decreasing under oversupply. The industry interests including steel makers and distributors would continue loss making operations due to major sales volume down and price down.

The integrated steel makers are in tough position. The makers are in historical production cut stage when the major 5 steels’ raw steel production decreased by 42% to 4.18 million tonnes in February from a year earlier, which was 40-year low level. They are likely to keep the low level production in and after April. They would post inventory valuation loss for finished and semi-finished steel products along with burden of high priced carry over raw materials.

The electric furnace steel makers’ raw steel output decreased by 48% to 1.3 million tonnes in February from a year earlier. Some makers plan to increase the production slightly but they would keep low level operation.