By Katya Golubkova and Yuka Obayashi
TOKYO (Reuters) -Kobe Steel, Japan’s No. 3 steelmaker, on Thursday reported a 3% fall in quarterly crude steel output due to lower prices and the potential impact of U.S. tariffs on car production, similar to declines at Nippon Steel and JFE Holdings.
With the U.S. tariff risk looming, Japan’s Iron and Steel Federation has warned domestic crude steel output could fall below 80 million metric tons this year versus 84 million tons a year ago. That would be the lowest since the 67 million tons produced in 1968, the Federation said.
The latest pressure comes as Japan’s top tariff negotiator Ryosei Akazawa pressed the U.S. to swiftly implement an agreed cut to auto tariffs during a meeting this week with U.S. Secretary of Commerce Howard Lutnick in Washington.
Japan is also grappling with a surge in cheap steel exports from top producer China, which is dragging down prices and prompting countries, including Japan, to consider protective trade measures.
Japanese car sales to the U.S. are already falling as automakers shift production to the U.S., Mexico and Canada to reduce costs.
For the April-June quarter, Kobe Steel’s crude steel output slid 3% to 1.46 million metric tons on weaker domestic consumption in the construction and auto sectors. Nippon Steel’s output fell by 7% to 9.46 million tons and JFE dropped by 3% to 5.61 million tons.
“The downward trend in domestic steel demand will continue due to population decline, decrease in exports of finished auto to the U.S. and indirect exports by other manufacturing industries,” Nippon Steel said on Friday.
Nippon Steel expects a 50 billion yen hit to its annual profits from the U.S. tariffs, while Kobe Steel sees a 5 billion yen impact. JFE plans to close several domestic facilities to reduce capacity.
“U.S. tariff measures pose the greatest risk, particularly with regard to trends and impacts in the automotive and construction machinery sectors,” JFE said in its earnings presentation on Monday.
To offset domestic weakness, Nippon Steel and JFE are focusing on overseas expansion. Nippon Steel bought U.S. Steel for $15 billion, pledging close to a similar amount in investments into the newly acquired assets, betting on U.S. demand growth.
JFE, together with a partner, announced a 120 billion yen investment to expand facilities in India, the biggest driver of the global steel demand, backed by heavy infrastructure spending.
“Looking at the world, the only attractive markets for the steel industry are India and the U.S.,” said Ryunosuke Shibata, analyst at SBI Securities. “Even if Asian countries have the potential to expand demand, there is a risk as China is close.”
To survive, “there is no choice but to expand business in growing overseas markets,” Shibata said.
(Reporting by Yuka Obayashi; Editing by Muralikumar Anantharaman and Christian Schmollinger)
