Japan's crude steel output is likely to fall in July-September from a year earlier because of persistently weak demand in both domestic and export markets, the country's trade and industry ministry (Meti) said.
Meti expects output to drop by 2.3pc over the period to 20.1mn t, it said in its quarterly forecast released on 8 July. Output is likely to remain stable from April-June.
The projected year-on-year output decline is the result of persistently weak demand from key domestic steel-consuming sectors, including automobiles and construction, Meti said.
"The situation has not changed significantly from the previous quarter", a Meti official told Argus.
Demand for ordinary steel products from the automobile sector is forecast to increase by 1.9pc on the year to 2.4mn t in the quarter. But Meti characterised this as only a "slight increase", despite it being a higher year-on-year growth rate in comparison with other sectors.
Meti had anticipated a strong rebound in the automobile sector, and consequently steel demand, after some car producers resumed operations. The auto manufacturers had suspended operations for up to six months in 2024 following alleged false reporting of safety tests results.
Some car producers remain cautious about pushing to ramp up output, the Meti official told Argus, without naming any companies. This is because some carmakers are prioritising quality over quantity, Meti suggested, possibly to avoid a repeat of past safety scandals.
Japan's largest domestic car producer Toyota was among those that halted production because of safety issues in mid-2024. Toyota said it has since focused on building a solid foundation for production to enhance safety and quality.
Steel demand from the construction sector remains under pressure from a labour shortage and rising material costs, according to Meti. This is likely to cap ordinary steel demand from the sector at 3.9mn t, a similar output level to the same period last year.
External markets
Japan's steel exports are also projected to decline, with shipments expected to fall by 11.5pc on the year to 6.1mn t in July-September, Meti said.
Meti attributed the drop to an influx of low-cost Chinese steel products, which continue to flood key export markets including southeast Asia. Japanese steel producers are reluctant to lower their selling prices to compete with cheaper, non-value-added items, the Meti official added.
Meanwhile, the blanket 50pc tariff imposed by the US on imports of steel is unlikely to have a significant impact on domestic crude steel output, at least until September, the Meti official said. This is largely because many of the Japanese steel products imported by US customers cannot be easily replaced with domestic products, the Meti official said.
Meti's optimism comes despite some Japanese steel producers struggling to maintain stable business with US clients following Washington's decision to double its sweeping import tariffs on steel to 50pc from 4 June.
