1 Economic & Steel Market Development in Japan 68 th OECD Steel Committee Paris May 6-7, 2010 The Japan Iron & Steel Federation
2 Macro-economic overview Steel Supply and Demand v v v Steel Production Major Steel-Consuming Industries Steel Exports & Imports Outlook for 2010 Conclusion
The Japanese Economy in Annualized GDP growth rate contracted significantly in to 5.2%. Despite the current recovery, the Japanese economy remains lackluster due to sluggish capital expenditures, high unemployment. The unemployment rate slightly improved, but it will remain high in 2010. 3 Final demand category 2007 The ratio to GDP % 6.0 5.0 3.0 2.0 1.0 GDP growth rates in Japan (unit: %) 4.9 4.2 3.9 4.9 4.4 4.8 3.8 Unemployment Rate of Japan 5.0 3.9 2008 5.1 2008 1Q 2Q 3Q 4Q 5.3 0.0 Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Source: Statistics Bureau, Ministry of Internal Affairs and Communications 5.6 5.4 4.1 The ratio to GDP 5.3 3.8 5.2 1Q 2Q 3Q 4Q 5.3 5.2 4.4 The ratio to GDP Real GDP 2.4 100% 0.7 1.1 1.3 2.7 1.2 100% 3.6 1.5 0.1 0.9 5.2 100% Private Consumption 1.6 55% 0.6 1.5 0.1 0.8 0.7 56% 1.3 1.1 0.6 0.7 1.0 58% Residential investment 9.6 3% 3.8 0.1 2.4 8.1 3% 6.6 9.4 7.8 3.3 14.2 3% Private capital investment 2.6 16% 4.6 1.2 3.9 7.3 0.1 16% 8.7 4.2 2.6 0.9 19.3 13% Public investment 7.4 4% 4.5 5.2 0.8 0.1 8.5 3% 3.6 6.6 1.5 1.3 6.0 4% Exports 8.4 16% 3.5 1.4 0.7 14.5 1.6 16% 23.8 9.2 8.4 5.0 2 13% Imports 1.6 11% 1.0 2.7 2.6 0.1 0.9 11% 17.6 3.9 5.4 1.3 17.0 10% GDP Deflator -0.7-0.1-0.5-0.4 1.4-0.8-0.1-1.5-0.4-0.8-1.0 Source:Cabinet Office Note:The growth rates in the table are shown changes from the previous quarter in real terms. The figures for the 4th quarter of are basis of the 2nd preliminary estimates.
IIP continue to improve since Feb. The index in Feb 2010 decreased 0.6 points from the previous month to 93.7. All indexes had returned to almost the pre-crisis level. 4 170 160 150 140 130 120 110 100 90 80 70 60 Indexes for IIP, Shipments and Inventory(2005=100 Seasonally adjusted) Production index Inventory index Inventory ratio index Shipment index 系列 3 2 5 8 11 2 5 8 11 2 5 8 11 2 2007 2008 2010 Source: Ministry of Economy, Trade and Industry
Steel Supply and Demand in (Crude steel production) Crude steel production fell 26.3% to 87.53 million tons in. Crude steel production increased 50.7% to 26.51 million tons in 2010 1Q. 5 (million tons) 120 110 100 90 80 70 1973 119,32 million tons (2nd highest) Crude Steel Production(calender years) 87,53 million tons 2007 120,20 million tons (All-time high) (,000 tons) 32,000 30,000 28,000 26,000 24,000 22,000 20,000 18,000 16,000 Quarterly Crude Steel Production 30,835 17,596 26,510 60 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 (%) Year-on-Year change 30 20 10 0 10 20 26.3 30 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 2005 2006 2007 2008 2010 unit: % 50.7 50 30 Year-on-Year change 10 0.8 10 30 50 42.9 2005 2006 2007 2008 2010 Source: Ministry of Economy, Trade and Industry
Mar Feb Jan Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan (Steel Demand by the consuming sectors) 6 Index of the steel consuming sectors are recovering from 4Q. Government stimulus measures contribute the rapid recovery. % Figure 5. Automobile Industry (sales, production, year-on-year basis) % 30.0 20.0 Industrial Machinery 75.0 65.0 10.0 0.0-10.0 55.0-20.0 45.0 35.0 25.0 15.0 5.0 5.0 15.0 25.0-30.0-40.0-50.0-60.0 % 20.0 10.0 Jan 2007 Year-on-year rate of general machine IIP Apr Jul O ct Jan 2008 Apr Jul O ct Jan Electric Machinery Apr Jul O ct Jan 2010 35.0 0.0 45.0 Production of four-wheel car 10.0 55.0 65.0 Domestic sale (excluding imported cars) Export of finished cars 20.0 30.0 2007 2008 2010 Source: Ministry of Economy, Trade and Industry 40.0 50.0 Jan 2007 Year-on-year rate of heavy machine IIP Apr Jul O ct Jan 2008 Apr Jul O ct Jan Apr Jul O ct Jan 2010
(Steel Exports) Steel exports decreased 9.7% to 34.44 million tons in, but it started recovering with strong demand in mainly Asia in 3Q. The primary users of Japanese steel exported to Asia are the local factories of Japanese companies (automobiles, home appliances, etc.) and re-rollers (selling slabs, hot-rolled coils and other products). 7 (Million tons) 40 35 30 25 a) Total Steel exports(calender years) 34.4 (Million tons) 10 9 8 7 b) Total steel exports (Quarterly) 10.5 10.0 9.5 8.1 6.5 7.2 10.2 10.5 20 99 00 01 02 03 04 05 06 07 08 09 6 07.1Q 2Q 3Q 4Q 08.1Q 2Q 3Q 4Q 09.1Q 2Q 3Q 4Q Source: Ministry of Finance, JISF (unit:,000 tons) Steel Exports by Destination China South Korea Taiwan ASEAN10 Others 2007 6,342 (17.2%) 9,591 (26.0%) 3,599 (9.8%) 8,978 (24.4%) 8,342 (22.6%) 36,852 2008 6,670 (17.5%) 9,282 (24.3%) 3,703 (9.7%) 10,383 (27.2%) 8,090 (21.2%) 38,128 6,468 (18.8%) 9,830 (28.5%) 3,370 (9.8%) 7,747 (22.5%) 7,027 (20.4%) 34,442 Source: Ministry of Finance
(Steel Imports) 8 Steel imports dropped 42.2% to 4.61 million tons in. The drop were in cold-rolled sheets and coils, ferroalloys and many other product categories. Steel Imports by Category (thousand tons) 10 8 6 4 2 0 6 4 2 0 (million tons) Japan's Steel Imports a) Total steel imports (Calendar years) 98 99 00 01 02 03 04 05 06 07 08 09 (million tons) b) Ordinary steel imports (Calendar years) 98 99 00 01 02 03 04 05 06 07 08 09 2.5 4.6 2007 2008 YoY change (%) Pct. Pig iron 1,474 956 293 (69.3) 6.4 Ferroalloys 2,143 2,221 1,029 (53.7) 22.3 Ordinary steel ingots/semi-finished 234 127 43 (65.9) 0.9 Specialty steel ingots/semi-finished 9 14 5 (61.3) 0.1 Ordinary steel 3,799 3,706 2,495 (32.7) 54.1 Flat-rolled products 2,790 3,291 2,064 (37.3) 44.7 Heavy/medium plates 187 227 135 (40.9) 2.9 Hot-rolled sheets 1,172 1,640 1,023 (37.7) 22.2 Cold-rolled sheets and coils 962 972 583 (40.1) 12.6 Galvanized sheets 371 357 257 (28.0) 5.6 Tin plate/tfs 10 7 11 65.5 0.2 Other metallic-coated sheets 67 68 41 (39.8) 0.9 Electrical sheets 20 19 14 (25.1) 0.3 Long products 369 344 344 0.1 7.5 Rails/Steel sheet pilings 7 20 15 (22.7) 0.3 Sections 97 82 72 (12.1) 1.6 Bars 13 15 15 0.4 0.3 Wire rods 253 226 241 6.5 5.2 Tubular products 100 71 87 22.6 1.9 Specialty steel 286 205 181 (11.4) 3.9 Secondary steel products/others 720 746 566 (24.2) 12.3 Total 8,664 7,973 4,612 (42.2) 100.0 : Imports from Korea 2,881 2,844 1,915 (32.7) 41.5 : Imports from China 1,995 1,879 833 (55.6) 18.1 : Imports from Taiw an 982 855 627 (26.7) 13.6
Macroeconomic Outlook For 2010, prediction of GDP growth rate (Government = 1.4%, private-sector research institutions =1.6%). All index except public investments are expected to be stable, or to increase. For 2011, 19 research institutions forecast the average growth of 1.9%. 9 Economic Forecasts by the Japanese Government (Jan. 10) and 23 Major Private-sector Research Institutes (as of Feb. 10) (Unit: YoY %) FY FY 2010 FY 2011 Real GDP Gov t forecast 23 research institutes 23 research institutes 19 research institutes Gov t Avg. Max. Min. forecast Avg. Max. Min. Avg. Max. Min. (2.6) (2.2) (2.1) (2.4) 1.4 1.6 2.2 0.5 1.9 3.0 1.0 Private-sector final consumption 0.6 0.6 0.7 0.4 1.0 1.1 1.4 0.7 0.9 1.6 (0.1) Private-sector housing investment (16.9) (18.4) (16.0) (19.1) 4.4 1.9 8.8 (5.1) 4.8 8.1 0.1 Private-sector corporate capex (16.5) (15.8) (15.3) (18.4) 3.1 2.9 8.1 (1.2) 5.1 9.6 (1.7) Public-sector fixed capital formation 14.4 6.7 7.5 5.7 (9.5) (10.6) (4.4) (22.0) (5.2) (1.0) (10.0) Export (14.4) (9.9) 12.2 (11.4) 8.3 11.6 15.9 8.5 7.5 12.0 2.4 Import (11.1) (11.3) 8.5 (12.6) 5.2 7.1 11.8 4.3 5.4 9.6 (2.8) Mining and manufacturing (11.2) (9.6) (6.7) (10.1) 8.0 10.2 17.1 7.1 5.0 11.8 (1.5) Consumer price index (1.6) (1.6) (1.4) (1.7) (0.8) (0.9) (0.2) (1.3) (0.2) 0.3 (0.7)
Outlook for Domestic Demand 10 Demand for steel is expected to be the same as in due to the outlook for a weak recovery in activity in steel-consuming industries. 2008 2010 Automobile New housing starts Production Non-residential construction starts (floor area) Shipbuilding Starts (Keels Laid) Electrical Machinery Industrial Machinery
Outlook for Steel Supply and Demand 11 2008 09/08 2010 Apparent consumption (crude steel equivalent) ( Unit:,000 tons) 83,067 55,169 66.4 % Exports (crude steel equivalent) 40,751 35,884 88.1 Imports (crude steel equivalent) 5,079 3,519 69.3 Crude steel production 118,739 87,534 73.7
Conclusion Although some severe aspects remain in the employment situation, the economy in 2010 is expected to pick up as corporate profits improve, reflecting improvement in overseas economies and the effects of policy measures including the Emergency Economic Measures. Steel demand is recovering, however, there is a risk of downturn due to raw materials price surge, an ending of the government economic measures. The environment of the Japanese steel industry remains challenging. The world economy and the steel industry face the critical phase at the traces of sustainable recovery. It is important that every country maintain an open environment for trade and investment.