Nippon Steel plans additional output cuts after July

Market: Metals
08/05/20

A deteriorating demand outlook has forced Japanese steel maker Nippon Steel to plan additional steel output cuts after July, by bringing forward the closure of two blast furnaces (BFs) originally planned for later this year.

Nippon Steel plans to close the No. 2 BF at the Muroran works in the first half of July at the earliest, in a continued effort to address sluggish demand for steel materials. The company is bringing forward refurbishment work of the Muroran BF, which was originally planned for some time during the second half of 2020.

Nippon Steel also plans to bank, or take out of blast, the No. 2 BF at the Yawata works after early July. The company does not plan to resume the BF before its planned closure in September, under the firm's strategy to scrap 10pc of its 54mn t/yr crude steel output capacity over the next few years.

The planned closure of the two BFs will reduce Nippon Steel's operating capacity by 4mn t/yr. The company today confirmed it had shut the No. 1 BF at the Wakayama works on 25 April following the closure of the Kure No. 2 and Kashima No. 1 BFs respectively in February and April. The No. 2 BF at the Kimitsu works is also planned to be closed later this month in response to falling demand from the automobile and construction sectors.

Domestic demand for steel materials has taken a hard hit from the Covid-19 outbreak and related quarantine measures. The near-term outlook remains bleak with domestic car manufacturers planning additional output cuts throughout this month, and possibly in June. Sales of new passenger car sales in Japan dropped by 27pc on the year to 144,674 in April after they declined by 10pc in March, according to Japan Automobile Dealers Association.

Japanese crude steel output dropped by 13pc from a year earlier to 7.9mn t in March. March output brought the April 2019-March 2020 total to 98.4mn t, the lowest output since 96.4mn t in 2009-10 in the aftermath of the global financial crisis.

Japan's manufacturing activity faces a slow return after Japan yesterday allowed prefectures with limited new Covid-19 cases to ease quarantine restrictions. The government has urged 13 prefectures, including the country's main industrial and consumer areas of Tokyo, Osaka and Nagoya, to continue taking maximum precautionary measures as they accounted for more than 80pc of virus infections in Japan.

By Rieko Suda

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