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Economic & Steel Market Development
in Japan
70th OECD Steel Committee
Paris
May 12-13, 2011
The Japan Iron and Steel Federation
1. Macro-economic Overview
2. Steel Demand and Supply
v Major Steel-Consuming Industries
v Steel Production
v Steel Exports & Imports
3. The Earthquake and Its Effects
2
2
3 1. Macro-economic Overview Japanese economy declined in Q4 ‘10
for the first time since Q3 ‘09.
However, there had been signs of
improvement since the beginning of this
year -- until 11 March.
The earthquake has given a drastic
impact on the Japanese economy.
Effects are especially being felt in:
Disruption of supply chain --
inflicting a sharp drop in the auto
and electrical appliance
manufacturing;
Power shortage by disaster of
Fukushima Daiichi nuclear power
plant; and,
A decline in consumer
confidence.
Research institutions revised their
economic forecasts for ‘11 downwardly
after the quake, while expecting
reconstruction-related rebound in ‘12.
Fig.1 GDP Growth Rate (%)
▲ 6▲ 5▲ 4▲ 3▲ 2▲ 1
01234
Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ
2007 2008 2009 2010
PrivateConsumption PrivateResidentialInvestment
Private Non-Resi.Investment PublicInvestment
Net Exports PrivateInventory
GDP(expenditure approach)
Source: Cabinet Office
Chart 2. 13 Institutes' Predictions of Real GDP Growth Rateas of Apr. 27, 2011 (Unit: %)
preEQ
postEQ
preEQ
postEQ
FY2011
FY2012
Japan Center for Economic Research 1.5 ▲ 0.1 1.8 2.4 ▲ 1.6 0.6
Mitsubishi Research Institute, Inc. 1.5 0.5 1.7 2.4 ▲ 1.0 0.7
Mizuho Research Institute 1.6 1.3 1.8 2.2 ▲ 0.3 0.4
Nomura Securities Co., Ltd. 1.5 1.1 2.3 2.6 ▲ 0.4 0.3
total: 13 institutes
(incl. other 9 institutes)
avarage 1.6 0.6 2.1 2.6 ▲ 1.0 0.5
FY2011 FY2012 Changes
4
Manufacturing activities bounced
back in ‘10, from a sharp drop of ’09,
while construction showing few signs
of recovery.
Disruption in supply chains, together
with restricted power supply, is likely
to put downward pressures on
activities in the steel-using sectors,
particularly the automotive and
machinery manufacturers.
(Steel consuming sectors)
2. Steel Demand and Supply
Construction
In the hardest-hit coastal regions,
investigations for reconstruction are
still going on, while some urban
areas have seen tentative
reconstruction activities started.
Compared to the Great Hanshin and
Awaji Earthquake, it is taking much
longer for reconstruction activities to
go into full swing.
Automotive
Interruption in the supply of car
parts is hampering auto
manufacturing for a prolonged
period.
It is expected to take some more
time for the production to return to
normal.
Industrial
Machinery
Paralised supply of parts has
temporarily interrupted production
even in western Japan, which
remained intact.
Electrical
Machinery
While production is partially coming
back to normal, disruption in the
supply chain is hampering
production, even in the areas not
affected by the quake.
Source: Press Release, News papers
Fig.4 Effects of the Earthquake
Source: METI, MLIT, JAMA
Fig.3 Activities of Major Steel-consuming Sectors
40
60
80
100
120
140
2005 2006 2007 2008 2009 2010
Automobile Production Industrial MachineryElectrical Macinery ShipbuildingCivil Engineering Building Construction (Floor Area)
3
5
Japan’s crude steel production
recovered to 110m tonnes in ’10, from
a dramatic drop of ‘09, thanks to:
Brisk exports to Asian countries;
and,
A gradual recovery in the domestic
demand.
Output in March ‘11 decreased yoy
for the first time in 17 months, due to
the effect of the earthquake.
Most of the affected facilities in the
east Japan, however, have resumed
production, plus those in central/west
Japan remained intact -- there are no
major obstacles in terms of steel
supply.
(Crude steel production)
Fig.6 Crude Steel Production
▲ 60
▲ 40
▲ 20
0
20
40
60
80
08.4 7 10 09.1 4 7 10 10.1 4 7 10 11.1
(Ye
ar-to
-ye
ar c
om
pa
riso
n %
)
0
200
400
600
800
1,000
1,200
1,400
year-to-year comparison Crude Steel Production (Right Scale)
Fig.5 Crude Steel Production
112.7 112.5116.2
120.2 118.7
87.5
109.6
80
90
100
110
120
130
04 05 06 07 08 09 10
Source: Ministry of Economy,Trade and Industry
Million tonnes
Source: Ministry of Economy, Trade and Industry
6 (Steel Exports)
Steel exports in ’10 increased by
26.0% to 43.4m tonnes, largely
helped by a strong demand in the
South-east Asian region.
Asia accounts for more than 80% of
the total exports.
With Japanese mills supplying
steel to local factories of
Japanese companies
(automobiles, household
appliances, etc.)
Main exporting items are high-end
products of HR/CR and coated
sheets/coils.
Fig.7 Steel Exports by Destination
7.5
(17.3%)6.5
(18.8%)
6.7
(17.5%)
6.3
(17.2%)
6.2
(17.6%)
11.0
(25.3%)9.8
(28.5%)
9.3
(24.3%)
9.6
(26.0%)8.8
(24.9%)
3.7
(8.5%)3.4
(9.8%)
3.7
(9.7%)
3.6
(9.8%)3.5
(10.0%)
11.4
(26.3%)7.7
(22.5%)
10.4
27.2%)9.0
(24.4%)7.8
(22.2%)
9.8
(22.7%)
7.0
(20.4%)
8.1
(21.2%)8.3
(22.6%)8.9
(25.3%)
0
5
10
15
20
25
30
35
40
45
50
2006 2007 2008 2009 2010
(Million tons)
China South Korea Chinese Taipei ASEAN(10) Others
35.236.9
38.1
34.4
43.4
Other
2%
Ordinary Steel
Products
68%
Other steel sheets
5%
Long products
6%
Galvanized
13%
CRC/CRS
9%
HRC/HRS
22%
Pipes and tubes
4%
Plates
9%
Special Steel
19%
Semifinished
11%
Fig.8 Exports by product (in 2010)
Source: Ministry of Finance
4
7 (Steel Imports)
Steel imports in ’10 increased sharply
from a drop last year, almost returning
to the pre-crisis levels.
Imports increased 56.2% to
7.2m tonnes.
Korea, China, and Chinese Taipei
account for some 70% of total imports
in ’10.
Main importing items are ordinary
steel products, followed by ferroalloy
and pig iron. Fig.10 Steel Import By Main Products (in 2010)
Ferroalloy
26%
Others
15%
Pig Iron
8% Ordinary Steel
Products
51%
Source: Ministry of Finance
Fig.9 Steel Imports by Country of Origin
1.5
(20.3%)0.8
(18.1%)
1.9
(23.6%)
2.0
(23.0%)
2.3
(28.9%)
2.8
(38.8%)
1.9
(41.5%)
2.8
(35.7%)
2.9
(33.2%)
2.6
(32.6%)
0.8 (11.5%)
0.6 (13.6%)
0.9
(10.7%)
1.0
(11.3%)
1.1
(13.3%)
0.1
(1.0%)
0.0
(0.9%)
0.2
(2.4%)
0.1
(1.1%)
0.1
(0.9%)
2.0
(28.4%)
1.2
(25.9%)
2.2
(27.7%)
2.7
(31.3%)2.0
(24.4%)
0
1
2
3
4
5
6
7
8
9
10
2006 2007 2008 2009 2010
(Million tons)
China South Korea Chinese Taipei ASEAN10 Others
8.0
8.7
8.0
4.6
7.2
8 3. The Earthquake and Its Effects
Compared with the Great Hanshin & Awaji Earthquake in 1995, this quake has
affected far broader areas, not only with the quake itself but also with effects of
tsunami and of the damaged nuclear power plant.
With budget for reconstruction not drawn up, it is too early to assess the
implication of the quake to the economy – and to steel demand as well.
The Great Hanshin & Awaji Earthquake The Great East Japan Earthquake
Date January 17, 1995 March 11, 2011
Magnitude M7.3 M9.0
Affected area Concentrated on Kobe cityBroad area
(affecting several prefectures)
Character of the areaConsuming area
(densely-populated areas)
East coast of Japan
(incl. industrial area)
Damage Building collapse and fire Building collapse and fire
Tsunami
Liquifaction Liquifaction
Nuclear plant
Port facility Port facility
RecoveryRelatively speedy recovery
of city function.
Expected to take longer because of
huge tsunami devastation.
Dead 6,434 14,704
Missing 3 10,969
Evacuee(peak time) Around 320,000 Around 460,000
National expenditure 5 trillion yen (6 years) 10 trillion yen?
Damage amount 9.9 trillion yen 16-25 trillion yen (Cabinet Office)
(as of May 1)