* Japan's steel imports hit 16-year high in January
* Strong Japan demand attracts other Asian producers
* Nippon Steel, JFE saw surge in profits
By Yuka Obayashi and Manolo Serapio Jr
TOKYO/SINGAPORE, March 6 A spike in Japan's
steel imports threatens to arrest a nascent recovery in domestic
prices of the alloy and crimp profits at the nation's
steelmakers, while offering other Asian producers opportunities
to unload their surplus output.
Japan's large steelmakers have in the past year sold more at
home and at higher margins due to resurgent demand following the
economic policies of the new government. That has led to surging
profits for Nippon Steel & Sumitomo Metal Corp, Japan's
top steelmaker, and No.2 JFE Holdings, among others.
But that has also opened a door for other steelmakers from
Asia, who are suffering from low margins amid an oversupply in
the region, to push through exports. As a result, Japan's
imports of steel products hit a 16-year high in January.
"Steel products from South Korea and China are now headed
toward Japan as it's the brightest spot in Asia with robust
demand," said Shinya Higuchi, Nippon Steel's executive vice
Japan's imports of steel products jumped 43.7 percent
year-on-year in January to 487,000 tonnes, the highest since
March 1998, the Japan Iron and Steel Federation said this week.
Imports from South Korea, Taiwan and China rose 38.5 percent,
58.5 percent and 68.9 percent, respectively, for the month.
Prime Minister Shinzo Abe's mix of easy monetary policy and
spending, reconstruction work in areas destroyed by a 2011
earthquake and tsunami, and planned building projects for the
2020 Tokyo Olympics are reviving domestic steel demand that had
been on a slump following the 2008 global financial crisis.
Japan's crude steel output hit a five-year high of 110.6
million tonnes in 2013 due to rising demand, and imports of
steel products have risen for a third straight month in January.
Imports had fallen for about a year after Abe's stimulus
policy sent the yen sliding. But they have rebounded since
November even as the yen remains soft, pointing to strong demand
"If imports remain elevated it could make it difficult for
domestic mills to increase steel prices," said Jeremy Platt,
analyst at UK steel consultancy MEPS.
Japan typically exports 40 percent of its steel output. But
in the fiscal year to March 2013, the proportion of exports has
dropped to 37 percent and further to 33 percent in the
October-December quarter, said Jiro Iokibe, analyst at Daiwa
"In the last six months, Japanese steelmakers have shifted
more volume to the domestic market because it's more profitable
to sell at home," said Iokibe.
The price of hot-rolled coil (HRC) - a steel product used
for pipes, ships and cars - in Japan has rebounded 6 percent
from a year ago to 66,000 yen ($640) a tonne in March. The price
of heavy plates has risen more sharply to 75,000 yen per tonne
from 67,000 yen, according to Tokyo Steel Manufacturing
By comparison, HRC is priced at $558 a tonne in Southeast
Asia .HRC-ASEAN=SI, according to data compiled by Steel Index.
In China, the world's top steel producer, HRC is sold in
Shanghai at around 3,400 yuan ($550) a tonne SH-SHA-6HRCOIL,
having fallen to an eight-month low of 3,390 yuan in late
February, based on data from Chinese consultancy Steelhome.
"This is the best season for Japanese steel companies, but
the biggest risk for them will be the price if the inflows from
overseas remain strong," said Daiwa's Iokibe.
Higher steel prices in Japan are offering other Asian
steelmakers a lucrative market for their products amid slower
demand at home and elsewhere in the region as they continue to
China, which produces nearly half the world's steel, has
around 300 million tonnes of surplus steel output capacity.
South Korea's Hyundai Steel fired up its third blast furnace in
September and POSCO began operation of its first
blast furnace in Indonesia in December.
Nippon Steel's Higuchi said increasing trade disputes via
anti-dumping actions brought by Southeast Asian countries are
also making exports to these markets more difficult for Chinese
and South Korean producers.
"Some South Korean products are sold cheaper here than their
home market. But to make any anti-dumping cases, we need to
prove that local industries are injured by such moves. At the
moment, that has not been proven and the Japanese industry body
may need to carefully look into that," he said.
Stockpiles in Japan of three major steel sheet products -
hot-rolled sheets, cold-rolled sheets and surface-treated sheet
- stood at 4.09 million tonnes at the end of January, the
highest in 15 months, according to an industry source.
($1 = 102.3300 Japanese yen)
($1 = 6.1282 Chinese yuan)
(Editing by Muralikumar Anantharaman)