Analysts and producers think that steel demand in Japan will fail to satisfy the expectations after the devastating earthquake and tsunami which hit the country on March 11 this year. Meanwhile, the country's construction sector is suffering due to the increasing strength of the yen.
Some steel industry officials had estimated the volume of reconstruction demand at 3-4 million mt over three years starting next year, but now they say that will be substantially delayed. More recently, analysts have been slashing forecasts for additional demand for products such as rebar and shaped steel.
Nippon Steel Corp, Japan's top steelmaker and the world's fourth biggest, said that the boost to demand from the disaster would be smaller than that seen at the time of the Kobe earthquake which swelled the need for construction steel by 50-80 percent. "Demand for steel this time would be much less than that of Kobe, probably less than half of the 3 million mt of demand created at that time," Shinichi Taniguchi, Nippon Steel's executive vice president, told a news conference previously.
The steep rise in the yen, which is up about five percent this year, is also bad news for steelmakers as it makes their products less competitive in international markets. Steel demand could sag further if the strong yen and a power shortage push more Japanese manufacturers to move production abroad and cut capital investment at home.
Eiji Hayashida, chairman of the Japan Iron and Steel Federation and president of domestic steel producer JFE Steel, has repeatedly said the yen level and the speed of its rise have exceeded the ability of Japanese manufacturers to cope with them.