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Production dropped by 0.3% to 107.23 million tonnes as steelmakers faced continued weak demand at home and in export markets.
In particular, demand for vehicles weakened after a programme of government subsidies on environmentally friendly vehicles ended in September, hitting steel demand and forcing producers to rein in their production, JISF noted.
Demand was also hit by the global economic downturn and the strong yen, which hampered exports, as well as Japan’s territorial dispute with China that led to a wide-scale boycott of Japanese goods, particularly cars.
Japan’s trade ministry recently estimated that the Chinese boycott cost Japanese mills some 550,000 tonnes in lost production in the October-December quarter.
As a result, production by blast furnace operators, the main source of steel used in cars and electronic appliances, fell by 0.5% on the year to 82.30 million tons.
Output by electric arc furnace (EAF) operators, meanwhile, which is used mostly in construction, rose by 0.3% to 24.92 million tons, boosted by strong demand for reconstruction and civil engineering projects.
For December alone, however, crude steel production rose by 2% year-on-year to 8.56 million tons, the first increase in four months and an indication that perhaps the worst is over for the country’s mills.
Export demand is on the rise, thanks largely to recent large falls in the value of the yen, and cheap imports have also slowed considerably, helping out EAF operators.
There is hope that the government’s massive economic stimulus package, a good portion of which has been earmarked for infrastructure projects, will help increase steel demand over the next few months.
Japan’s steel output fell for a second year in 2012, the Japan Iron & Steel Federation (JISF) said.