Japan steelmakers may cut output on recession fear

TOKYO Oct 21 (Reuters) - Japanese steelmakers could soon cut output as demand shows signs of weakening amid growing fears that the U.S. financial crisis could develop into a wider global growth recession, Shoji Muneoka, the head of the Japanese Iron and Steel Federation, said on Tuesday.

Muneoka, who is also the president of Nippon Steel Corp (5401.T), the world's second-biggest steelmaker, said business sentiment has completely changed over the past month.

"August order data clearly shows the financial crisis has begun affecting demand in Japan. Output cuts will become necessary at Japanese steelmakers," he said.

"We (Nippon Steel) will decide on the timing, product and other details after carefully studying the market."

The Federation said on Tuesday domestic orders for steel dipped 6.6 percent to 5.52 million tonnes in August, hit by declines in orders from the auto and electronics sectors and slower growth at shipbuilders and machinery makers.

China's September crude steel output sank 9 percent from a year earlier, hit by weakened domestic demand and outages during the Olympic games.

Last month, four big Chinese steel makers, including Shougang Group, agreed to cut production by up to 20 percent, perhaps until the year-end, to boost prices. [nHKG210667].

They are joining industry leaders such as ArcelorMittal, (ISPA.AS) which said last month it may cut output by 15 percent, and Baoshan Iron and Steel Co. (600019.SS) [ID:nLH359717].

Muneoka said last month Japanese steelmakers are not considering output cuts, saying demand from shipbuilders and construction machinery makers remains solid. (Reporting by Yuko Inoue; Editing by Michael Watson)