Japanese Steel Mills Plan 26% Lower Output in Apr-Jun

Clear evidence has emerged that Japan’s steelmakers are slashing production this quarter, as the mills ratchet back in response to the COVID-19 outbreak and the hole that this has punched in domestic and export steel demand.

A survey of mill expectations conducted by Japan’s Ministry of Economy, Trade and Industry and released May 12 shows that the Japanese steel producers plan to produce 19.28 MnT of crude steel during April-June, down 26.2% year on year and 20% lower from January-March output. The total of crude steel the mills expect to produce this quarter was also 0.4% lower than the demand forecast Meti had released on April 9.

All mills surveyed said they were trimming output because of the sharp drop in steel demand caused by the COVID-19 spread, a Meti official explained, pointing out that this is the first time since April-June 2009 (at the height of the global financial crisis) that quarterly steel output seems set to slip below 20 MnT. “The survey responses were mostly collected in April, so in fact, there is a possibility that the mills have since adjusted their plans again and that actual output will become lower,” he explained.

In its quarterly production survey, Meti solicits responses from Japan’s three blast furnace makers and about 60 mini-mills and special steel producers, Mysteel Global notes, but excludes re-rollers.

For finished steel products, Japanese mills were planning to produce some 17.09 MnT this quarter, down 22.9% year on year and 18.6% from January-March. Within this total, production for domestic supply is at 11.45 MnT, down 23.6% year on year and 16.1% previous quarter, while output for export is expected to reach 5.64 MnT, down 21.4% on year and 23.2% on quarter.

A sales official with an integrated mill in Tokyo said that the effect of the virus outbreak is unprecedented, so mills have been taking measures to prepare for the worse case imaginable, such banking blast furnaces to slash output. “We are not sure if those stoppages we planned will be sufficient to correspond to the rapid decline in demand, or whether we need to take further measures,” he said.

Japan’s largest integrated mill, Nippon Steel, announced on May 8 that it intends to bank one additional furnace and take another offline for relining from early July, taking to six out of its 15 furnaces either taken offline already or planned to be taken offline, as Mysteel Global reported.

JFE Steel, the second largest integrated mill in Japan, had already started relining a furnace from late-April and plans to bank another from late-June. With the exception of the No.2 unit at Nippon Steel’s Kure works in western Japan – where the 2,080 cu m furnace had been earmarked for idling months before – all these furnace stoppages are part of the scramble among Japan’s largest steelmakers to quickly bring their output far closer to the vastly reduced need for steel in the wake of the virus’s spread.

A trader in Tokyo said mills using electric furnaces including both ordinary carbon steel and special steel producers, were also cutting production. “We heard that mini-mills making ordinary steel are cutting 10-20% of their output and that special steel producers are cutting theirs even more – perhaps as much as 50% on year. We’re seeing demand decrease in all areas and without a doubt, we may suffer the worst drop in steel demand this year that we’ve seen in a long time,” he added.

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.