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[Ferro-Alloys.com] Japan's slowing economy has steelmakers worried as the country's manufacturing sector sees more pressure from the impact of the COVID-19 outbreak.
Latest data released by Japan's Cabinet Office on February 17 showed the country's gross domestic product shrank by an annualized 6.3% over the last quarter of 2019, its first fall in five quarters.
Another fall in the first quarter of 2020 would push the country into a technical recession - two consecutive quarters of growth contraction - with its February purchasing managers' index expected to come in at 47.6, lower than 48.8 in January and its steepest fall since December 2012, the au Jibun Bank Japan Manufacturing PMI showed.
JAPAN'S STEEL OUTLOOK GLOOMY
"Japan's construction demand has slowed after completion of Olympic infrastructure," a Japanese trader said.
"(Steel) Exports too for the country is weaker. We just have to wait and see how this virus issue plays out, it's just adding another downward pressure for mills."
In addition to construction steel demand, Japanese carmakers are also likely to lower their requirements of steel.
The Japanese government plans to set up a task force to deal with the impact of Covid-19 on the country's automotive sector, its Ministry of Economy, Trade and Industry said.
"That's also why you don't see scrap prices within Japan improving, even though regional buyers are snapping up Japanese scrap or even when Turkish scrap prices are seeing up," a trader there said.
RAW MATERIAL WORRIES BUILD
As Japan grapples with economy uncertainty, in a year when the Tokyo Olympics is scheduled to take place, steel mills and traders alike have shared concerns on raw material demand and supply.
Some iron ore market sources were heard to be expecting possible reselling of the raw material to take place by mills if poor downstream steel demand continued to drag on. However, others noted that there would be higher possibility of forward term contract volume renegotiations instead.
Japan, Asia's largest exporter of scrap, saw a total export volume of 7.66 million mt in 2019, with major buyers in South Korea, Vietnam, Taiwan, and Bangladesh, accounting for 92% of the total exports.
Its prime grade scrap was primarily consumed by specialty steel makers, or induction furnaces within the region.
Being the world's third largest crude steel production, Japan's performance fell below the 100 million mt mark in 2019, at 99.3 million mt, down by 4.8% from a year ago, figures from the world steel association showed. (S&P Global Platts)
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- [Editor:kangmingfei]
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