[Alpha Biz= Reporter Kim Jisun] According to the steel industry in Japan, they have been reducing their facilities and operating factories only at night since the 2010s as part of restructuring efforts to decrease production. This trend has been attributed to prolonged economic downturns, leading to declines in construction and real estate investments.
As of the 4th, the average operating rate of Japanese steel companies such as Nippon Steel, JFE Steel, and Kobe Steel is around 70-75%. Smaller steel companies operate at around 60%. Maintaining operation rates at these levels implies shutting down electric furnaces according to demand.
The direct cause is the sluggishness in construction investment. With fewer constructions of apartments and buildings that heavily rely on reinforcing bars, steel suppliers have had to adjust their supply. Construction investment in Japan has been decreasing since 1996. Subsequently, major steel product demands decreased gradually. The rebar market, which reached 11.33 million tons in 2006, has shrunk to an 8 million ton market last year.
Construction investment in South Korea has been declining since 2017. Similar to Japan, South Korea began experiencing a decline in construction investment 13 years earlier than the expected peak population year (2030).
Japanese companies are restructuring their facilities regularly to match the reduced demand. Nippon Steel began dismantling its aging facilities in 2019. Last September, they completely removed facilities at the Hiroshima steelworks. Similarly, JFE Steel reduced its steel production capacity from 4 million tons to 2 million tons annually by dismantling facilities in the Gahin industrial area in September last year. Instead, they plan to increase the proportion of high-value-added steel products in sales from 30% to 60%.
알파경제 Kim Jisun Reporter(stockmk2020@alphabiz.co.kr)
