Japan steel federation chief sees higher domestic output in 2019

TOKYO (Reuters) - Japan’s crude steel output is likely to increase in 2019, amid strong local demand from construction segment ahead of the 2020 Tokyo Olympics and in the absence of major impact from natural disasters, said the head of Japan Iron and Steel Federation.

The nation’s crude steel output slipped 0.3 percent to a nine-year low in 2018, as a string of natural disasters and glitches at steel plants led to slower production. The drop in output pushed Japan’s ranking to the world’s third-biggest producer - after China and India.

“Steelmakers could not produce as much as they had planned due to a series of natural disasters and system trouble last year,” Japan Iron and Steel Federation Chairman Koji Kakigi said.

“However, the output is seen to rise this year as I don’t expect natural disasters to happen again in the same magnitude,” he said.

The country’s steel export also dropped 4.2 percent in 2018 to 36.53 million tonnes, sliding for a fifth straight year, with shipments to the United States plunging 19.6 percent.

In March last year, the United States had imposed 25 percent tariffs on imported steel to protect U.S. producers, risking retaliation from major trade partners such as China, Europe and neighboring Canada.

“The biggest reason for the drop is a lack of production capability by Japanese steelmakers,” Kakigi said, citing repeated trouble in their mills.

He predicted Japanese steel exports to remain flat this year.

Asked about an impact from Vale’s catastrophic dam failure in Brazil on steelmakers’ procurement of iron ore, Kakigi said: “The prices of iron ore are rising. We’ll need to closely watch how the local government and Vale deal with this, and how China’s market would move after the Lunar New Year.”

China’s benchmark iron ore futures extended gains on Thursday to hit their highest in nearly 17 months, bolstered by concerns over supply disruptions in the wake of the mining disaster in Brazil.

Reporting by Yuka Obayashi, Editing by Sherry Jacob-Phillips