METAL MARKETS Japan relying on more steel imports

With its steelmakers having cut production, Japan will start relying more on steel imports than exports, and developing nations such as Brazil and Korea will be expanding their steel capacity steadily through to the year 2000, Wharton Econometrics reports in a world steel forecast.

According to John Jacobson, director of basic industries at Wharton Econometrics and the senior analyst who directed the study, Japanese steel companies will continue to diversify and newly industrialized countries will be a major factor in world steel exports.

Having cut output earlier this year, Japanese steel companies are sharply reducing capacity and manpower. “In Japan, the days of 100-million-tonne production years are gone,” Mr Jacobson says. “Most companies are diversifying into new materials business and other areas in which their specialized expertise gives them a competitive advantage.”

The sharp increase in the yen’s value has hurt Japan’s steel exports at a time when the country has been importing more steel from neighboring South Korea, he says. Steel imports now account for about 4% of domestic demand, as opposed to only 0.4% in 1978. Exports will decline

Japan will see a small change in steel export levels through to the end of the century, according to the forecast. Exports during the 1987-2000 period will decline from more than 36 million tonnes in 1985 to less than 25 million tonnes by 1995. Steel imports by Japan, however, will increase by more than 40% during the same period, to 6.2 million tonnes in 1995.

While the major producers are restructuring their industries, several newly industrialized nations are expanding existing steelmaking facilities and simultaneously building new plants, “These countries are expanding,” Mr Jacobson says. “Their steel industries are growing and demand is burgeoning.”

He explained that most of these countries are building their infrastructure and therefore have a growing need for construction steel. In contrast to most steel-producing nations, which turn out more than half of their steel in plants built since 1950, developing countries such as Brazil and Korea are rapidly building plants equipped with the latest technology. Improved steel capacity

Brazil’s steel capacity is forecast to increase to 33.6 million tonnes this year, up 3.7 million tonnes from 1986, then rise an average one million tonnes per year through to 1992. Thereafter, capacity will increase more rapidly, reaching 47 million tonnes by the year 2000.

South Korea, too, will experience fast growth in steel capacity, Mr Jacobson says. From an estimated 16.4 million tonnes in 1987, Korean steel capacity is projected to reach 32.7 million tonnes by 2000.

These capacity increases for both countries, he says, will be accompanied by higher exports: from 1986 levels, Brazil’s exports will have doubled by the end of the century, and Korea’s will have tripled.

The study also states that U.S. steel firms have become more competitive in world markets because of cost-cutting measures. Substantial investments in eletrogalvanized and continuous casting capacity have dramatically improved U.S. steel companies’ competitive positions. “Those steel producers who keep costs down will survive,” Mr Jacobson says.

Total capacity of U.S. steel companies will fall steadily, from a projected 118 million tonnes this year to 78 million tonnes by 2000, Mr Jacobson says.

The forecast indicates U.S. steel exports will increase gradually, rising from 1.5 million tonnes this year to 1.9 million tonnes by 1989, where they will remain through to 1998. During the 1987-98 period, imports are forecast to rise from 23 million tonnes to 25.8 million tonnes.

Wharton Econometrics was formed from the merger of Wharton Econometric Forecasting Associates and Chase Econometrics.