Japan Steelmakers Fall as Inventories Rise Despite Output Cuts

  • Global steel industry suffers as China exports its surplus
  • Trade ministry sees Japan output, exports falling next quarter

Steelmakers led declines in Japan after an increase in stockpiles signaled a slower pace of a recovery as global peers struggle with overcapacity.

JFE Holdings Inc., Japan’s second-biggest steel supplier, fell as much as 4 percent and traded 3.1 percent lower at 1,900 yen as of 11:24 a.m. in Tokyo. Tokyo Steel Manufacturing Co. dropped as much as 6.1 percent before paring its decline to 3.5 percent. The Iron and Steel Index fell the most among segments listed on Japan’s Topix.

The nation’s inventories, excluding specialty alloy, increased 1.3 percent to 6.67 million metric tons as of the end of November, compared with a month earlier, the Japan Iron and Steel Federation said Monday on its website. Japan’s trade ministry said last week that steel stockpiles remain at high levels despite output cuts by domestic steel suppliers as demand falls more than anticipated.

“Ordinary steel inventories increased in November rather than decreased,” Kazuhiro Harada, a senior analyst at SMBC Nikko Securities Inc., said Tuesday by phone. That’s negative for the market, he said.

The global steel industry is suffering from a glut due to a steep decline in demand in China, the world’s biggest producer, which is exporting its surplus. Japanese mills including the largest, Nippon Steel & Sumitomo Metal Corp., and JFE export almost half of their production, according to Bloomberg Intelligence.

The trade ministry has forecast Japanese crude steel output will fall 1.6 percent to 26.31 million tons next quarter. Demand for domestic steel products is expected to drop 0.9 percent, dragged down by weakening sales to shipbuilders and industrial equipment makers, while steel exports are set to fall 6.4 percent.