Japan: Ship orders dip 59% y-o-y in Aug, but steel demand firm

In August, Japan's new ship orders from both home and abroad declined by 59.1% on year to 496,800 gross tonnes (GT) or in 15 vessels, according to the latest data released by Japan Ship Exporters' Association (JSEA) on September 14. A JSEA official attributed the on-year decline partially to the high base a year ago, and actual steel consumption by Japanese shipbuilders has been firm.

Japan's new ship orders in August were also down 47.4% on month. And the JSEA official believed that some sales negotiations have been prolonged because Japanese shipbuilders' offering prices have risen with higher material prices including steel.

"Ship demand is expected to increase with ship owners' new investment in eco-friendly vessels, so we believe that orders will be placed in coming months and we don't worry much about the decline in August," he said.

"But the expected further rise in material prices, especially steel prices, is very concerned, and we believe that shipbuilders will take strong stance on their ship prices," he emphasized.

A sales official from a shipbuilder in western Japan was unable to comment regarding the price negotiation between shipbuilders and steel producers for October-March 2023 period, but he said the rise in steel prices is inevitable, and it might be added by Yen 40,000/tonne ($277/t).

"Shipbuilders consume large volumes of steel, so the impact from such a large increment in steel prices is severe, and the hike has to be transferred to vessel prices," he added.

Nippon Steel, Japan's largest integrated mill, believed had succeeded in lifting Yen 40,000/t for steel product prices to Toyota Motor, Japan's largest automaker for October-March 2023 period. And the settlement with two giants would usually be the benchmark for other integrated mills and their long-term contract customers, as reported.

"Though new ship orders in August declined, Japanese shipbuilders are still holding over two years of backlog orders which will keep them operating at high levels. So their steel consumption will also stay high," the sales official predicted.

The backlog orders held by Japanese shipbuilders totaled 21.49 million GT by end-August, up 37.8% on year but down 13.6% on month, according to the JSEA data.

And the latest data released by Japan Iron & Steel Federation showed that carbon steel booked by Japanese shipbuilders over January-June approximated 1.43 million tonnes, up 15.6% on year.

Written by Yoko Manabe, yoko.manabe@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.