UPDATE 1-Japan steel output up 6th month, driven by tax-led demand

Wed Mar 19, 2014 4:30am EDT

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(Recasts, adds Federation official's quotes)

* Apr-Feb output climbs 4 pct to 101.77 mln T

* Output in fiscal 2013 on track to hit 6-year high

* Rush to build homes and buy cars before tax hike boost demand

By Yuka Obayashi

TOKYO, March 19 (Reuters) - Japan's crude steel output rose year-on-year for a sixth straight month in February and was set to hit a six-year peak in fiscal 2013, driven by higher demand for houses, cars and electrical home appliances ahead of a sales tax hike in April.

Crude steel production, also buoyed by higher public works spending, rose 1.40 percent in February from a year earlier to 8.44 million tonnes, the Japan Iron and Steel Federation said on Wednesday.

Solid demand for the alloy could underpin profits for Japanese steelmakers such as Nippon Steel & Sumitomo Metal Corp and JFE Holdings Inc.

"(Growing) demand for automobiles and home appliances such as refrigerators, air conditioners, and laundry machines helped boost output of wide strips," said a researcher at the federation.

"In addition, active construction of houses, warehouses and hospitals led to 21 consecutive months of rises in H-shape steel production."

Crude steel output for the first 11 months of fiscal 2013 that ends on March 31 rose 4 percent to 101.77 million tonnes, supported by Prime Minister Shinzo Abe's push to revitalise Japan's economy with fiscal spending and monetary easing.

The Ministry of Economy, Trade and Industry forecast in December that the nation's crude steel output in fiscal 2013 will climb to a six-year high of 111.88 million tonnes, up 4.3 percent from a year earlier.

All eyes are now on the aftermath of the sales tax hike.

Japan's top steelmaker Nippon Steel sees only a short-term impact on demand and no lasting damage from the tax hike as it will be offset by the government's stimulus measures, its incoming president said on Friday.

The steel federation has predicted that crude steel output will weaken slightly in fiscal 2014 year-on-year due to the sales tax hike. (Editing by Muralikumar Anantharaman)

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