Latest News

As US tariffs loom, Japan's steel production may fall to its lowest level since 1968.

Kobe Steel is Japan's No. Kobe Steel, Japan's No.

The Iron and Steel Federation of Japan has warned that domestic crude steel production could drop below 80 million metric tones this year, compared to 84 million tons last year. The Federation stated that this would be the lowest production since 1968 when 67 million metric tons were produced.

The latest pressure came as Japan's chief tariff negotiator Ryosei Acazawa, urged the U.S. this week to quickly implement an agreement to reduce auto tariffs in a meeting with U.S. secretary of commerce Howard Lutnick.

Japan is also struggling with an increase in steel exports, especially from China, the world's largest producer. This is driving down prices, and has prompted other countries to take protective measures.

As automakers move production to Mexico, Canada and the U.S. to cut costs, Japanese car sales in the U.S. have already fallen.

Kobe Steel's crude output for the April-June period fell 3% to 1,46 million metric tonnes due to a weaker domestic demand in the auto and construction sectors. Nippon Steel saw its output fall by 7%, to 9.46 millions tons. JFE's production fell by 3%, to 5.61million tons.

Nippon Steel stated on Friday that the downward trend of domestic steel demand would continue because of population declines, a decrease in finished auto exports to the U.S. as well as indirect exports from other manufacturing industries.

Nippon Steel anticipates that the U.S. Tariffs will have a negative impact on its annual profit of 50 billion yen, while Kobe Steel is expecting a 5 billion-yen effect. JFE intends to close several domestic plants to reduce capacity.

JFE's earnings presentation, which was released on Monday, stated that "U.S. Tariff Measures pose the greatest risks in particular with regards to trends and impacts within the Automotive and Construction Machinery Sectors."

Nippon Steel & JFE focus on overseas expansion to offset domestic weakness. Nippon Steel purchased U.S. Steel at $15 billion and pledged to invest close to the same amount into newly acquired assets. They bet on U.S. Demand Growth.

JFE and a partner announced an investment of 120 billion yen to expand facilities in India. India is the largest driver of global steel demand.

Ryunosuke Shijibata, an analyst at SBI Securities, said that India and the U.S. are the only two attractive markets in the world for the steel industry. Even if Asian countries are able to increase demand, China is very close.

Shibata stated that to survive, "there's no other choice than to expand your business overseas." (Reporting and editing by Muralikumar Aantharaman, Christian Schmollinger and Yuka Obayashi)

(source: Reuters)