UPDATE 1-JFE says skipped test on steel pipes; shares fall

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TOKYO, May 22 (Reuters) - JFE Steel Corp, a core unit of JFE Holdings Inc (5411.T), the world's third-biggest steel maker, said on Thursday it had failed to conduct a required test on the strength of steel pipes mainly used for oil rigs.

JFE shares dropped 5 percent by 0118 GMT, while shares in rival steel makers, including Nippon Steel Corp (5401.T) and Sumitomo Metal Industries (5405.T), also fell.

A company official who declined to be named said JFE Steel had skipped one of the tests required for 2,457 pipes out of about 189,000 it had shipped to three Japanese companies and 38 overseas firms in the past five years. JFE attached certificates to the products, suggesting it completed all the necessary tests.

The American Petroleum Institute (API) standard requires steel makers to conduct a water pressure test then an X-ray or supersonic wave test on pipes. If any defects are found they must conduct another round of the same tests after fixing the defects.

The official said JFE had skipped a second water pressure test because it does both X-ray and supersonic tests, which are more accurate and precise than the water pressure test.

"We were doing tougher tests, and we believe the quality of the pipes was not affected by not having a second water pressure test," the official said.

Other standards do not require a second water pressure test, and a planned October revision to the API standard will eliminate the requirement too, the official said. Companies that order steel pipes can choose which standard the products should follow.

Nippon Steel fell 3.6 percent and Sumitomo Metal slipped 4.8 percent. The iron and steel subindex .ISTEL.T was down 4 percent, underperforming a 1.5 percent fall in the benchmark Nikkei average .N225. (Reporting by Sachi Izumi)