Major Japanese mills are going to cut production, implementing some additional repairs, as the global market environment has been unfavorable recently, SteelOrbis has learned from trading sources. Moreover, some units will be not in operation due to the typhoon in September.
“We expect that mills will cut production in November-December. There’s no profit with this market price. It is still hard to predict by how much, but at least by a few million tons,” a Japanese source told SteelOrbis.
During the first five months of the the current fiscal year, Japan increased its exports of hot rolled coil (HRC) by 13.9 percent to 5 million mt, according to the Japan Iron and Steel Federation, even despite the 2.7 percent reduction in crude steel production over this period. Steel prices in the international market have been under pressure, but at least 40 percent of the total revenue of the big Japanese mills is coming from the export business and the domestic market has lacked strength, so they have been forced to increase sales volumes abroad. The latest low-price deals for Japanese HRC were heard to Turkey at $440/mt CFR and slightly below in mid-September. Higher availability of coils for October shipment has led to such a low price. At the same time, mills have been giving offer prices $10-20/mt higher after this deal, not willing to sell very cheap for November shipment. The latest Japanese offers for Vietnamese customers have been at about $465-470/mt CFR.
Another reason for lower production in Japan in late 2019 will be the stoppage of some plants due to the typhoon in September. According to a local media source, some equipment of Nippon’s Kimitsu Works, hit by the typhoon, will be restarted only in six months’ time. Kimitsu Works has a total steelmaking capacity of about 8 million mt and one of its BOFs suspended production on September 11.