Japan’s steel stocks at highest level since February

Japan’s stockpiles of carbon steel rose in August to their highest levels since February this year as producers continued to ramp up output while domestic shipments fell to their lowest levels in 15 months.

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Total inventories rose by 3.7% from July to 6.63 million tonnes, according to figures released by the Japan Iron & Steel Federation (JISF).

Stockpiles held by producers increased by 34.4% to 5.27 million tonnes, their highest levels in seven months, as mills increased production to its highest level in three months, up by 1.2% to 6.2 million tonnes.

At the same time, shipments dropped by 5.2% to 5.97 million tonnes.

This marks the lowest volume since April and resulted from an 8.9% plunge in domestic shipments to 3.66 million tonnes. Export shipments, meanwhile, were flat month-on-month at 2.3 million tonnes.

Stockpiles held by dealers, meanwhile, rose by 1% to 1.36 million tonnes, their highest level in three months.

Although last month’s figures were distorted by the traditional week-long “Obon” break at the beginning of the month, they nevertheless indicate that there appears to be little impetus driving increased demand for steel.

Moreover, shipment volumes could be set for further significant declines now that the government has ended its subsidy programme on the purchase of new environmentally friendly vehicles.

Separate data issued by the JISF shows that the automotive sector was the only segment of the domestic manufacturing industry to report a growth in steel orders so far this year.

The sharp drop in domestic shipments meant that the domestic inventory ratio jumped to a one year high of 152%, while the overall inventory ratio, which measures stockpiles against shipment volumes, rose to 111.1%, its highest level since April.

Japanese steelmakers have struggled to keep their domestic stockpiles in line with demand. Indeed, the head of Fudenko, the association that represents the country’s mini-mills, last week described the consistently high inventory levels among its membership as “a long-term structural problem”.