Japan's Steel Industry on the Rise Driven by Exports to China

Following the worst half-year production figures in 41 years during the period January-June 2009, the Japanese steel industry appears to be picking up, fuelled by exports to China, which makes and purchases almost half the world's steel. In addition, according to reports from Industrial Info Resources (Sugar Land, TX), there are signs that automotive and domestic appliance manufacturers will begin to restock steel inventories that were depleted during the economic downturn.

During the first half of 2009, crude steel production in Japan fell to just under 37 million tons, down 40.7 percent from the previous year, affected mainly by falling demand from the automotive industry. The fall was the largest six-month drop since the Japanese Iron and Steel Federation began issuing statistical information in 1948. However, the June production figure of 6.89 million tons was a 6.3 percent increase on the previous month, although it reflects a 33.6 percent drop compared to June 2008.

According to the World Steel Association, global steel production at 99.8 million tons in June 2009 fell 16 percent compared to June 2008. Apart from Japan's production of 6.89 million tons, other countries also reported much lower figures for June. In the European Union (EU), Germany reported a production of 2.5 million tons, down 41.1 percent; Italy produced 1.6 million tons, down 43.1 percent; and France produced just 1.1 million tons, down 37.9 year over year.

Other countries in the Asian region fared better than the EU countries and Japan. China produced 49.4 million tons of crude steel, which was a 6 percent year over year increase. South Korea, while reporting a drop in production in June 2009 at 4 million tons, suffered a 14.4 percent year over year fall, much less than Japan's 33.6 percent.

However, the figures for the last few months before July give reason for optimism. In Japan, after reaching a low in March, production during April, May and June showed a drop in the rate of decline. Almost all the reported production figures to the World Steel Federation (Brussels, Belgium) showed the rate of contraction slowed considerably in June.

The optimism is echoed by Lakshmi Mittal, chairman and owner of ArcelorMittal (Luxembourg), who predicts that global demand for steel will rise as much as 10 percent in 2010, despite the company's recording a net loss of $792 million for the half-year.

Mittal expects global demand for steel outside China to rise 10 percent, based on his expectation that the economies of emerging countries will recover from the global downturn faster than expected. In the U.S. and Europe, government stimulus packages are starting to show positive benefits. In China, Mittal expects the increase to be even higher, but qualifies his optimism by stating that the rise in the fortunes of the steel industry will be "slow and progressive."

The World Steel Association was formed in October 1967, when it was known as the International Iron and Steel Institute. Membership includes 180 steel producers worldwide, which together produce 85 percent of the world's steel. It is a non-profit organization with headquarters in Brussels, Belgium, and a second office in Beijing, China.