METI forecasts higher steel output, mills still wary of imports

Responses gathered from steelmakers recently about their production plans for the current April-June quarter, the first quarter of Japan's new fiscal year, show that they expect to produce 20.72 million tonnes of crude steel during these three months, some 2.8% higher than the 20.15 million the mills produced during  April-June last year and up 3.3% from January-March output.

Though the targeted production level remains very low, it marks the first year-on-year rise in ten quarters since the October-December 2023 period. Moreover, the view presented to METI, which it announced on May 12, is more positive than that the steelmakers held in early April when they were only expecting to produce around 20 million tonnes this quarter, as Mysteel Global reported.

During the three months to end-June, domestic demand – expressed in terms of crude steel – will rise by 1.4% on year to 13.97 million tonnes, according to METI, while that for export will decline by 3.8% compared with April-June last year to 5.9 million tonnes.

Admittedly, METI's projections aren't always realized. Back in early April, the ministry was expecting that January-March crude steel output for the quarter just gone would total 20.4 million tonnes whereas actual production turned out to be far lower at 20.06 million, Mysteel Global notes.

"There has been no significant change in the demand environment," METI commented last Tuesday, adding that the steel industry should be "vigilant" about the situation in the Middle East, the worsening steel supply-demand balance in China, and US tariff policies.

Regarding production of the two steel items the ministry regularly tracks, output of H-beams will total about 750,000 tonnes this quarter – higher by about 10,000 tonnes from January-March and by about 30,000 tonnes on year –  while that of small bars will reach about 1.61 million tonnes, up by 140,000 tonnes on quarter but lower by 50,000 tonnes on year, according to the forecast.

Demand for steel for construction is sluggish against the backdrop of labor shortages and soaring material costs, and electric furnace manufacturers and others have not lost their cautious stance in their production schedules, industry daily Tekko Shimbun noted.

Commenting to Japanese media the same day after chairing the regular Steel Industry Roundtable meeting in Tokyo, Nippon Steel vice president Takashi Hirose observed that while the steel market currently is "not in a phase of rapid economic recovery," there are signs of improvement in some sectors such as industrial machinery and in production of steel sections.

But concerns remain, such as the level of steel imports, even though during last year, total imports had decreased by 465,000 tonnes to 7.38 million tonnes, according to Japan Iron & Steel Federation (JISF) data.

"Even if the volume of imported steel products entering Japan is decreasing, the tonnage is still at a high level because domestic steel demand is also decreasing," Hirose said. "The import volumes still need to be monitored," he told Tekko Shimbun.

Hirose also expressed concern that China's crude steel production rate remains on a scale of 1 billion tonnes/year and that exports within that total are at a 100 million tonnes/year scale. "We are highly aware of the impact on the international market," he said. JISF statistics show that within Japan's total steel imports last year, China supplied 935,400 tonnes or about 20%.

China is shifting from finished steel products to semi-finished products such as billets and slabs to circumvent trade measures in various countries, Hirose remarked. While the direct impact on Japan is limited, this is "becoming a factor that disrupts the balance of global supply and demand," he argued.

Japan's crude steel production record

Unit: Million tonnes

Source: METI

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

Edited by Alyssa Ren, rentingting@mysteel.com