Posted on 29 Apr 2015
Nippon Steel & Sumitomo Metal Corp, Japan's top steelmaker, plans to cut crude steel output in the April-June quarter by 1 million tonnes, or about 9 percent, from the previous quarter because of rising inventories at home.
The reduction is bigger than the 4.9 percent fall forecast by Japan's industry ministry this month in the country's crude steel output for the period, which would take it to the lowest level for the quarter in six years.
Steel product inventories at major Japanese wholesalers totalled 5.91 million tonnes as of February, up 4 percent from about a year earlier, due to lower automobile output and weaker housing starts, both hit by a sales tax rise in April last year.
"We are worried about a surge in inventories," Nippon Steel's executive vice-president, Katsuhiko Ota, told reporters.
"We will cut output to help reduce stocks," he said.
The world's No.2 steelmaker by output expects domestic demand and its own output to pick up from the July-September quarter. Its output could recover further in the second half of the business year, leading to annual output of 44-45 million tonnes for the year to March 2016, Ota added.
That would be flat on the 44.96 million tonnes in the year just ended, when output fell 1.6 percent due to weak manufacturing and construction demand.
Rival JFE Holdings also said last week its crude steel output was projected to remain flat on the 28.4 million tonnes produced in 2014/15, with production set to even out after a dip in the April-June fiscal quarter.
Ota said domestic demand looked to remain healthy, but steel prices abroad, which plunged earlier this year, may hover around current levels for a while.
Nippon Steel reported that its 2014/15 recurring profit, which is pre-tax before one-off items, rose 25 percent as lower material costs boosted margins. It did not provide a profit forecast for this year.
The global steel industry has been struggling with overcapacity and sluggish demand in the world's top buyer, China, but Japanese steelmakers have enjoyed sound earnings thanks to stable prices at home and a slump in the price of iron ore, a key material for making steel.
