TOKYO: Nippon Steel Corp, the world's No.4 steelmaker, said on Wednesday it plans a further 250,000-tonne cut in crude steel output in October-March, joining some rivals in cutting production amid increasingly uncertain market conditions.
ArcelorMittal SA, the world's largest steelmaker, said this month that steel demand was weakening further in the second half after the European debt crisis, leading it to scale back some investment plans.
Devastating floods in Thailand, an Asian hub of car production, have also hit Japanese automakers hard as parts-supply disruptions have forced them to cut output, reducing steel demand.
Nippon Steel said it would move forward its planned overhaul of a blast furnace at a plant near Tokyo by about a month, and halt the plant's operations in early December.
The shutdown will cut its crude steel output by 250,000 tonnes, in addition to the 800,000-tonne output cut originally planned for October-March compared with the same period a year earlier. Nippon now plans second-half output of 15.25 million tonnes.
"In the bigger scheme of things, 250,000 tonnes probably isn't a huge amount for the Japanese. But it's still a sign of the times that there's some localised weakness in some parts of Asia," said James Wilson, analyst at RBS Morgans.
"Demand is flat to mildly improving in some places and the Japanese market is reacting to short-term headwinds like the Thai flooding."
A sudden drop-off in demand and a slump in steel prices have caused many small Chinese steel firms to lose money.
As of end-October, 60 Chinese blast furnaces took advantage of the demand slowdown to shut plants for maintenance. The shutdown has cut crude steel production by around 2-3 million tonnes, or 5 percent of an average monthly output, according to a survey by industry consultancy Custeel.com.
But further production cuts are unlikely among Chinese steel mills, some analysts say, unless there is a big slump in ore and steel prices again.
"Steel mills are able to earn around 300-400 yuan per tonne for rebar based on current iron ore prices, which has prevented further output cuts in China," said an iron ore trader in coastal Shandong province. But those mills that suspended some capacity have remained cautious and not returned to normal production yet, he added.
"Some small Chinese steel mills have even become eager to resume output since last week to seek higher margins and propped up by end users' restocking," said Custeel.com analyst Hu Zhengwu, who has been in frequent touch with steel mills.
POSCO, the world's third-biggest steelmaker, said the company had no plans for production cuts.
Japan's Sumitomo Metal Industries Ltd and Kobe Steel Ltd also said they have no such plans.
Nippon Steel and its smaller rival JFE Steel Corp, both exposed heavily to Asia's export market, last month slashed their full-year profit outlooks by about 20 percent, citing a deterioration in the steel market.
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