TOKYO As it faces
monumental currency, economic, geopolitical and global
competitiveness challenges, Japans integrated steel
industry is banking on innovation in the form of a technology
push and targeted investments in Southeast Asias "little
tigers" to capture growth in a global market long on supply and
short on demand.
Members of the Japan Iron and
Steel Federation (JISF) International Trade and Cooperation
Grouppart of JISFs Market Research and
International Economic Affairs divisionspoke with
AMM in Tokyo this past week on the health of
Japans key consuming sectors, the pulse of its export
markets and the rising tide of steel imports, particularly from
The meeting took place as
tensions continue to simmer between Japan and China over
territorial rights to the Senkaku Islands in the East China Sea
and a steady shift in Japans market focus and growth
strategy to Southeast Asia and away from the West and the
The mega-merger of Nippon Steel
Corp. and Sumitomo Metal Industries Inc., officially completed
two months ago to create the worlds second-largest
steelmakerputting it ahead of Chinas Hebei Iron
& Steel Group Co. Ltd. and Baosteel Group Corp. and South
Koreas Posco Ltd.also weighs heavily on relations
between the two countries.
"Exports to Asia are
increasing," one of the groups top executives told
AMM in an exclusive interview. "Japan is supplying
more high-grade steel as Japanese manufacturers expand their
overseas operations in Asia."
Japan exported 31.72 million
tons of steel in the first nine months of this year, up a
modest 0.2 percent from the same period in 2011. Korea was the
leading destination at 6.4 million tons, or 20.2 percent of the
total, followed by China (4.7 million tons, or 14.7 percent)
and Thailand (4 million tons, or 12.5 percent), and about 2
million tons of high-value material were shipped to the United
Indirect exports of steel also
are rising, the JISF executive said, citing stepped-up
shipments of autos, ships and machinery. "But the growth rate
is slowing as production shifts from Japan to other countries,"
Meanwhile, Japanese imports of
ordinary steel products have risen dramatically, propelled in
large part by the strength of the yen. "Imports from Korea, in
particular, are climbing because of capacity expansion there,"
the executive said, noting a significant jump in material
arriving from that country during the fourth quarter of
Almost two years after a
devastating earthquake and tsunami rocked Japan, the
countrys steelmakers continue to benefit from a
24.75-trillion-yen ($300-billion) government stimulus program.
"Public works civil engineering projects, which had been
declining for many years, have been climbing steadily since
autumn 2011 because of the earthquake recovery program," the
JISF executive said.
Rebuilding efforts also have
helped stimulate residential construction in quake-damaged
areas, spark internal demand for construction machinery and
buoy the nonresidential construction sector, where demand is
said to be strong for seismic reinforcement in schools. Even
so, "the benefits of this budget are expected to emerge slowly
over many years," the executive said.
JISF credits another government
program, the so-called "eco-car" subsidy, with spurring
domestic auto sales, primarily for light vehicles, in the
second half of this year. The subsidy ended Sept. 21, the same
month that domestic auto production dropped for the first time
in a year.
Auto production could drop
further in years to come, JISF acknowledged. "There are many
reports of automakers reducing output in Japan and shifting
production to overseas because of expectations of mid- and
long-term growth in overseas markets and the prolonged strength
of the yen," the executive said.
Short-term, however, mills
supplying the Japanese auto sector are keeping a close eye on
auto output as well as Japanese automakers sales in
China, given the dispute between the two countries over the
"In September, production of
Japanese car manufacturers in China fell about 30 percent and
sales fell about 40 percent," the JISF executive said.
"Although China accounts for a small share of Japans
finished auto exports, these exports plunged 40 percent in
September from a year earlier to the 15,000-vehicle level."
Production and finished auto
export figures for October are not yet available, but in what
could be a telling indicator of how tensions are playing out,
Japan Airlines Co. Ltd. recently reported that the number of
passengers on flights between Japan and China plunged 33
percent in October from the same month last year, while the
number of passengers on flights to and from Southeast Asia,
including Thailand and Vietnam, climbed 18.3 percent.