Japan Domestic Steel Demand to Fall as Carmakers Cut Operations

Demand for steel in Japan, the world’s second-largest producer, will likely fall this fiscal year as customers including carmakers slash production following the nation’s worst earthquake, an industry chief said.

“The earthquake has had a serious impact on Japanese manufacturers,” Japan Iron and Steel Federation Chairman Eiji Hayashida told reporters in Tokyo today. “Even if there’s demand for restoration and reconstruction, domestic demand will likely fall.”

The 9.0-magnitude earthquake and tsunami that struck Japan on March 11 prompted automakers and electronics companies to shut plants, delaying steel sales to customers. New car sales in Japan decreased 37 percent in March from a year earlier, the biggest drop for the month, according to the Japan Automobile Dealers Association.

The industry has yet to give an updated forecast for steel production after the quake, Hayashida said today. In December, the federation said domestic steelmakers will produce about 110 million metric tons of crude steel for the financial year through March 2012, little changed from the year earlier.

While the disaster created an emergency demand for steel used in temporary houses for evacuees, the amount is not significant, Hayashida said.

Steelmakers expect demand for steel used in reconstruction of areas affected by the earthquake and tsunami will increase after the summer, the industry group chief said. He is also the president of JFE Holdings Inc. (5411)’s steel unit, Japan’s largest mill after Nippon Steel Corp. (5401)

Steelmakers will also unveil a plan by the end of this month on how the industry can save electricity, Hayashida said. The earthquake prompted Tokyo Electric Power Co. to shut power plants including the crippled Fukushima Dai-Ichi nuclear facility.

The government wants companies to reduce power use by as much as 25 percent this summer to avoid large-scale blackouts.

To contact the reporter on this story: Masumi Suga in Tokyo at msuga@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

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