Limited Impact of U.S. Tariffs on Japan's Crude Steel Output - METI

Japan's METI (Ministry of Economy, Trade, and Industry) has released the expected crude steel output and demand outlook for second quarter of CY18 (calendar year 2018) starting from April to June.

U.S. tariffs not to have major impact on Japan's crude steel output

The country's crude steel production is expected to touch 26.34 MnT in Q2 CY18, up by 0.9% against corresponding quarter of previous year and down by 1% from Q1 CY18 (Jan to Mar'18).

METI said that its steel output forecast for the second quarter of CY18 does not reflect any possible impact from new U.S. import tariffs on steel as it is not clear how the move will affect global flows of the metal.

U.S. government last month announced 25% import tariffs on steel but temporarily excluded six of its trade partners, including Canada, Mexico, Brazil, Argentina, South Korea and European Union. The exemptions included most U.S. allies but not Japan.

Japan's steel demand is likely to touch 23.32 MnT, an increase of 1.8% y-o-y basis. Out of this the domestic demand for ordinary steel is likely to be around 18.2 MnT an increase pf 2.4% y-o-y basis (12.2 MnT for domestic whereas 6.02 MnT for export markets).

Japan's steel demand outlook from different sectors

Now, looking at the demand for ordinary steel from different sectors, METI said that the demand of finished carbon steel from the construction sector is expected to be up by 0.1% y-o-y at 5.19 MnT whereas, against the previous quarter of Jan - Mar'18, the same will be down by 3.3%. The higher demand for the previous year of 2017 coming from urban development and from 2020 Tokyo Olympics related projects is likely to be negated by tepid demand from country's construction sector.

In the manufacturing sector, the demand of finished carbon steel from auto and electronic goods sector is expected to fall as generally the demand in Japan's first quarter of the new fiscal year, April-March, witnesses slow demand. Like India, Japan's fiscal year also starts from April and ends in March.

Steel demand from shipbuilding industry is expected to stay low but that from machinery sector will be firm against the backdrop of increased demand for construction machinery and machine tools.

METI has forecasted that the demand of finished carbon steel from manufacturing sector is likely to reach 7.01 MnT, up 1.5% y-o-y basis but down 2.9% against Q1 (Jan - Mar'18) CY18.

Exports forecast

In case of steel exports, METI said that in the first quarter of the FY19, exports will surge by 5.2% against Q1 FY18 to 7.76 MnT. However, they will be down 1.4% against Jan-Mar'18 quarter of CY18.