Japan steelmakers likely to boost exports

FE Team | Published: November 03, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

TOKYO: Nippon Steel & Sumitomo Metal Corp.\'s Kimitsu steel plant is seen in Kimitsu, east of Tokyo. Japan\'s top steelmakers reported higher first-half earnings this week, but slowing demand and bloated stockpiles could push them to sell more overseas, a

TOKYO, Oct 31 (Reuters): Japan's top steelmakers reported higher first-half earnings this week, but slowing demand and bloated stockpiles could push them to sell more overseas, adding to a global glut that has dragged Asian prices to five-year lows.
Prime Minister Shinzo Abe's sales tax hike in April has hit economic growth and consumer spending harder than expected, hurting sales in two sectors important for steelmakers, automotive and construction.
In a stark admission of the tax hike's harsh impact, the Bank of Japan surprised global financial markets on Friday by expanding its massive stimulus spending. Doubts, however, remained on how effective the move will be.
Nippon Steel & Sumitomo Metal and JFE Holdings , Japan's No.1 and No.2 steelmakers, respectively, said earlier this week they expect a pickup in building and vehicle sales, but analysts were not so sure the domestic market will strengthen enough to cut inventories which stood at a 13-year high at the end of September.
And steelmakers are slowly turning to overseas markets. Japan's exports of steel products rose for the first time in 13 months in September to 3.74 million tonnes, competing with a flood of Chinese steel.
"The biggest worry is the output adjustment by automakers," said Keiju Kurosaka, senior analyst at Mitsubishi UFJ Morgan Stanley. "There is a risk that spot product prices will fall into a downward spiral."
Nippon Steel and JFE plan to boost crude steel output to 46.1 million tonnes and 29.2 million tonnes, respectively, the highest since 2007 before the start of the global financial crisis.
"They don't want to cut output because it would boost their fixed costs. They would rather step up exports," Kurosaka said.
Nippon Steel and JFE export nearly half of their output and their export ratio in the first half edged up from the previous six months. Nippon Steel forecast an increase in the second half while JFE said the ratio will be flat.