Posted on 26 Oct 2015
Japan's steel industry body on Friday lowered its forecast for the country's crude steel output in the fiscal year to March 2016 by 1 million tonnes to 106 million tonnes, citing slow export demand.
"The biggest risk factor is slowing growth in the Chinese economy," Koji Kakigi, chairman of the Japan Iron and Steel Federation, told a news conference.
"We had projected about 107 million tonnes in crude steel output for this fiscal year, but it now looks that it would fall short by about 1 million tonnes due to slower export," he said.
The revised forecast marks a 3.5 percent drop from the country's actual crude steel output of 109.85 million tonnes in the fiscal year ended March 2015.
Japan's crude steel output fell 7.3 percent in September from a year earlier to 8.57 million tonnes, marking a 13th straight monthly drop and a six-year low for the month, as weak demand and high inventories forced steelmakers to cut output.
Production has been on a downtrend due to slack sales of cars and houses after a tax hike in April 2014, which caused a rise in stockpiles of steel products, and slumping steel prices in Asia that eat into export margins of Japanese steelmakers.
Asked when steel output would recover, Kakigi said it depends on export circumstances.
"We expect a certain amount of domestic demand going forward, but the problem is export," he said.
Kakigi, president of JFE Holdings' unit JFE Steel, said output was unlikely to go up in the current quarter.
Whether or not production rises would depend on for how long the current prices hold and how much steel China exports, he said.
"Many Chinese steelmakers are exporting steel products at a loss," he said.
"The bigger losses they make, the harder it gets for them to keep on doing like this."
Shanghai steel futures fell to an all-time low earlier this week after data showed China's economy grew at its slowest pace since 2009 in the third quarter, underlining demand pressure in the top consumer of the alloy.
China also makes nearly half the world's 1.6 billion tonnes of steel. With its once stellar growth slowing, the country is expected to export a record 100 million tonnes of steel to world markets this year to help address its spare steelmaking capacity - estimated at a hefty 300 million tonnes.
