JISF predicts another mediocre year for Japanese steel in FY26

"The environment surrounding the steel industry next fiscal year will remain the same as this fiscal," JISF chairman and Nippon Steel president, Tadashi Imai, told Japanese media, adding that more time will be needed for steel demand to recover.

On Tuesday, METI had painted a rather dull picture of domestic and export steel demand for the coming January-March quarter, arguing the impact of labour shortages and rising material costs continues to hamper construction industry growth while most manufacturing sectors – except for vehicle manufacturing – are also yet to show a significant recovery. "Overall, domestic demand is expected to remain broadly flat from the previous quarter," the ministry said.

This had led METI to predict total Japanese steel demand next quarter would reach 18.6 million tonnes, lower by 1.6% from January-March this year and higher by just a tiny 0.1% from the current October-December quarter.

Consequently, METI estimated crude steel output next quarter at 20.05 million tonnes, lower by 150,000 tonnes (0.8%) from October-December and by 350,000 tonnes (1.7%) from the final quarter of last fiscal.

On Thursday, the JISF cited similar concerns about market conditions for the coming fiscal, noting, for example, that although there could be a slight rise in civil engineering construction due to an increase in public works reserve funds, labour shortages and soaring material costs will remain.

For the manufacturing industry, the main automobile-related demand is expected to be lower than this year, the JISF said in a statement. "In addition to the impact of US tariff policies, domestic steel demand is also expected to be indirectly affected by China's continued export offensive of electric vehicles to ASEAN," it said.

In his briefing to Japanese reporters, Imai had also acknowledged that the tariff policies of the Trump administration were blocking steel trade flows and that "the impact on Japan's steel industry, which has a high export ratio, is significant."

In addition, regarding the export offensive of Chinese steelmakers against the backdrop of overproduction, Imai pointed out that "Japan is increasingly involved in trade measures by countries and regions targeting China," and that "this trend will continue next year."

Meanwhile, METI's overall steel forecast for the January-March quarter, this fiscal's last quarter, led it to estimate full fiscal crude steel output at 80.33 million tonnes, which is about 2.5 million tonnes lower than Fiscal 2020 result of 82.78 million tonnes, a watershed year as the total – a reflection of the COVID's impact on the Japanese economy – was the lowest level since Fiscal 1968. Last fiscal's total of 82.95 million tonnes was only narrowly better.

Were next fiscal's level to be about the same as this year's, this would actually be a good result for the Japanese mills. Industry pundits point out that over the past 20 years, Japanese crude steel output has declined by over 2% annually and were that to be repeated next year, the output total would slide further to around 78 million tonnes and break all recent record lows. This would also be over 17 million tonnes below the high of 95.64 million tonnes achieved just five years ago on the post-COVID rebound in fiscal 2021, Mysteel Global notes.

Written by Russ McCulloch, russ.mcculloch@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com