Japan’s crude steel output will drop for a second straight year in 2012 as a stronger yen hurts exports and domestic manufacturing remains weak despite a pickup in reconstruction demand, an industry body has said.
Steelmakers across Asia have been curbing production as a shaky global economy dents consumption with top producer China forecast to see slower growth in output this year.
Crude steel output in Japan, the world’s No. 2 producer, will drop by around 2–3mt (million tonnes) from 107.6mt in 2011, said Eiji Hayashida, chairman of the Japan Iron and Steel Federation. That would follow a 1.8% decline in output last year.
“A strong recovery in exports is unlikely to happen at the current yen rate, while domestic demand will dip slightly,” Hayashida, who is also head of the world’s No. 5 steelmaker JFE Holdings, told a news conference.
The yen’s rise to a record high of 75.3 yen against the US dollar in October has hit Japanese exporters, with shipments of passenger cars falling more than 10% in April–November.
China, whose steel output is six times bigger than Japan’s, is likely to see production growing around 6% to 728mt in 2012, slower than the 8.9% pace in 2011, as Beijing keeps a tight grip on its property sector.
Reconstruction of river banks and other engineering projects after last year’s massive 11 March earthquake will boost steel demand, but he said the increase will only be limited to 500,000–600,000 tonnes.
Imports of cheaper-priced steel will not exceed the current 5–6mt level in the next fiscal year that starts in April, because the usage is limited, Hayashida said. The current import volume represents about 10% of domestic demand.
“It is unlikely that imports will rise further because of specification issues,” he said. He also said that Tokyo Electric Power Co’s plan to raise rates for corporate customers would be difficult for steelmakers to cope with, particularly producers of construction steel who are now operating mostly at night and on weekends to take advantage of lower electricity rates. “The rate rises could push many of those into the red. We should be aware that high energy costs will deal a substantial blow to Japanese industries.