Katsuhiro Miyamoto, executive vice president of Nippon Steel, has expressed concern over China’s strengthening position in the global steel market as the world recovers from the COVID-19 pandemic.

 

According to Miyamoto, Chinese mills are investing in higher-quality products and recuperating faster than competitors worldwide given their intense investment in research and development. Moreover, he pointed out that as Chinese mills upgrade technology, specialty mills, including those in Japan, will encounter increased quality and price competition. 

 

For the first time in Japan, for example, Toyota Motor is buying lightweight Chinese steel from Baowu Steel for use in electric vehicles and hybrids produced in its domestic market, he said according to media reports days before the company announced plans to expand its reach beyond Japan.

 

The gradual recovery in 2020 is leading Nippon Steel to forecast an H2 2020 increase in production by 13pc or 2mn mt against the H1 2020 level. The recovery in demand, especially the auto industry, will allow Nippon Steel to restart previously idled furnaces. Nippon Steel plans to restart capacity by March 2021 but may do it sooner if market conditions improve. 

 

An additional recent challenge due to increased Chinese steel production is the iron ore price rally according to Miyamoto. Iron ore prices this week are already recording a slight drop against record highs last week. A slight weakening in demand is attributed to production restriction on an environmental basis in various regions such as Tangshan and rising shipments of iron ore from Brazil and Australia. Miyamoto expects iron ore prices to ease by March 2021.

 

An upward price risk on coking coal during Australia’s cyclone season was noted by Miyamoto. Coking coal prices are trending 20pc lower year to date against the end of 2019. 

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