TOKYO Japans territorial spat with China is expected to cost Japanese steelmakers around 550,000 tonnes in lost production in the current quarter, according to Japans Ministry of Economy, Trade and Industry.
Quarterly steel output is on track to fall below the 23-million-tonne mark vs. the ministrys previous estimate of about 23.5 million tonnes due to a widespread boycott of Japanese goods by Chinese consumers.
October crude steel production of 8.84 million tonnes was down 6.7 percent from the same month last year, the biggest year-on-year fall in nine months, due largely to a decline in domestic auto production and an increase in imports of construction steel, according to the Japan Iron and Steel Federation.
Japanese automakers were badly hit by the boycott, and they were forced to cut production as their sales in China slumped. The auto sector is the biggest steel-consuming market for Japans integrated steelmakers.
Domestic production of passenger vehicles by Japans eight leading automakers declined 12.4 percent in October compared with a year earlier, with production at Toyota Motor Corp. down 16.3 percent, Nissan Motor Co. down 13 percent and Suzuki Motor Corp. dropping 16.8 percent. Meanwhile, auto output in China sank 48.9 percent, with Toyota registering a 61.1-percent drop, Nissan logging a 44-percent decrease and Honda Motor Co. suffering a 54.2-percent decline.
Making matters worse, Japans domestic sales of new autos, trucks and buses declined 3.3 percent in November compared with the same month last year, the third consecutive monthly fall after the governments buying incentives ended in mid-September.
Tensions continue to simmer between Japan and China over territorial rights to the Senkaku Islands in the East China Sea, but automakers believe that the worst effects of the boycott appear to be over, although they still expect to see a year-on-year decline in sales.
Steelmakers said they expect demand from China to improve in the first quarter of 2013, and they also expect the recent weakness in the Japanese currency and the strengthening of the South Korean won to help improve the profitability of exports and raise the cost of imports.
A Ministry of Economy, Trade and Industry official told AMM sister publication Steel First much the same. "I think there will still be some impact (from the boycott) in the next quarter. However, the volume is not yet clear," he said.
A version of this article was first published by AMM sister publication Steel First.