- Improving auto, construction orders signal early demand recovery
- Annualised crude steel production remains below 82 mnt in CY’26
Japan’s crude steel production increased by 0.4% y-o-y and 2.3% m-o-m to 6.95 million tonnes (mnt) in July, marking the fourth consecutive month of y-o-y growth, according to the Japan Iron and Steel Federation. Despite the continued y-o-y increase, production remained at a relatively low level, equivalent to an annualised rate of below 82 mnt.
On a daily basis, crude steel production averaged around 224,000 tonnes (t), down by 2,000 t from June, indicating that the overall improvement in output remains limited.
Production by furnace
The modest increase in overall production was reflected across both major production routes. Basic oxygen furnace (BOF) output rose by 0.2% y-o-y to 5.21 mnt in July, while electric arc furnace (EAF) production increased by 1.1% to 1.74 mnt.
BOF production recorded its fourth consecutive month of annual growth, while EAF output increased for the first time in two months. However, the relatively small gains across both routes point to a gradual rather than broad-based improvement in steelmaking activity.
Production by steel category
By steel category, ordinary steel production rose by 0.5% y-o-y to 5.34 mnt, while special steel output edged up 0.1% to 1.61 mnt.
Ordinary steel production extended its annual growth for a second consecutive month. Special steel production, however, declined for the first time in three months, indicating that the recovery remains uneven across steel categories.
Hot-rolled steel output declines
Despite the increase in overall crude steel production, hot-rolled steel output declined by 2.8% y-o-y to 6.08 mnt in July, ending two consecutive months of annual growth.
Ordinary hot-rolled steel production fell to 4.75 mnt, while special hot-rolled steel output declined to 1.33 mnt. Both segments recorded annual declines, suggesting that the improvement in crude steel production has yet to translate into stronger output across downstream flat-steel categories.
Demand recovery remains gradual
On the demand side, there are early signs that Japan’s steel market may be approaching a bottom. Orders from the automobile and industrial machinery sectors are gradually recovering, while construction-sector orders have also moved above year-ago levels.
The improvement, however, remains gradual. High material costs and labour shortages continue to constrain activity in both construction and manufacturing, limiting the pace at which steel demand can recover.
External risks remain
External factors could also weigh on the recovery. Elevated Chinese steel production and exports could increase competition in Japan’s export markets, particularly if excess supply continues to flow into overseas markets.
Meanwhile, prolonged disruption in the Middle East remains a concern for global steel trade, with potential implications for trade flows and demand across steel-consuming markets.
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