With the state of emergency in Japan extending till May 6, leading construction companies like Shimizu and Kajima have announced a suspension of the mega projects. The country also has an upcoming Golden week holiday scheduled between April 29 till May 6.
Non-availability of labour, weakened steel demand and overall economic situation has led major steelmakers to scale down their production. Construction companies like Kajima and Obayashi are in talks with their clients to halt their 700 and 600 projects, respectively, until May 6, according to the local media report.
It is believed Japanese steelmakers are likely to close their facilities with delays in construction projects in the coming days. If the pandemic continues longer, the Japanese industry could see a lot of restructuring as companies try to adjust their earnings and balance sheets.
Japan’s top two steelmakers Nippon Steel and JFE Steel have already suspended their blast furnaces. After idling two blast furnaces Nippon Steel plans to idle third furnaces in Mid-May. With altogether five blast furnaces coming to halt, the total capacity could drop by over 25pc. Around 10-13pc production at these facilities could stop permanently with the US-China trade war likely to restart and higher raw material prices like iron ore and ferrous scrap.
Tokyo steel to follow the suit
Tokyo Steel, electric arc furnace mini-mill is also likely to lower its output in May if the steel demand falls further.
Japan overall output could drop below 90mn mt in 2020, the lowest since the financial crisis in 2009. The Ministry of Economy, Trade and Industry (METI) has estimated crude steel output to be 19.4mn mt in the April to June quarter 2020 compared to 26.57mn mt a year earlier and also down by 18pc from 23.6mn t in January-March. Japan’s domestic and export sales of steel products is forecast to fall by 18.1-18.28pc in April-June from the prior-year period.
Automakers shut facilities
Steel demand had already been hit as automakers, including Toyota Motors, temporarily shut down some local plants due to weaker demand or parts shortages.