Japan: Fluctuating demand for steel materials in domestic construction industry

The domestic construction industry in Japan is experiencing fluctuating demand for steel materials such as shaped steel, steel bars and welded steel pipes. In financial year 2022 (FY 2022), construction orders for steel, rebars, and plumbing were positive, but in April and May 2023, plumbing remained positive, rebars turned negative in May, and steel framing was negative for two consecutive months. Meanwhile, demand for steel pipe and formed bar is expected to continue, demand growth for formed steel, columns, and thick plate could be challenging.

Figures cited in the Ministry of Land, Infrastructure, Transport and Tourism's survey of construction contract dynamics show that of the approximately 470,000 contractors nationwide, about 12,000 were selected based on their size and completion value. Total population figures were estimated based on these numbers.

Orders in steel frame construction business increase

In FY2022, the total order value for the steel frame construction business increased by 24.3% compared to the previous year. The prime contractors' orders increased by 41.1%, and subcontractors' orders increased by 215.3%. This means that the workload for steel fabrication is expected to steadily accumulate.

Orders in rebar work business show mixed trends

Total orders for the rebar work business increased by 50.6% to JPY 251.919 billion ($1.80 billion). However, the majority of prime contractors decreased, while subcontractors' orders increased. This could be due to the fact that there were no prime contractors from August 2022 to March of this year.

Orders in plumbing business rise

Total orders for the plumbing business rose by 19.8% to JPY 8,480,141 million ($60,630 million). Both prime contractors and subcontractors saw an increase in orders.

Recent orders have mixed trends

The total orders for April 2023, pipe work increased by 22.3%, rebar increased by 74.3%, and steel frame decreased by 36.5%. The total orders for May 2023 for pipe work 12.4%, rebar decreased by 23.6%, and steel frame decreased by 12.3%. Since the number of rebar main contractors is JPY 2.712 billion ($0.019 billion) in two months, which is almost equivalent to FY22, a ripple effect on subcontractors is expected. On the other hand, subcontracting was positive for steel frames, but the number of prime contractors decreased sharply by 7-8%. The order environment is starting to stagnate.

Outlook

In addition to labour shortages in all industries, there are other challenges. Order cancellations due to high material prices and labour restrictions could lead to stagnation in orders. This could lead to a decline in demand for steel products.

 

Note: This article has been written in accordance with an article exchange agreement between Japan Metal Daily and SteelMint.