Nippon Steel Corp (5401.T), the world's second-biggest steelmaker, said on Friday that it would double its planned output cuts for the October-March period in response to slowing demand for Japanese cars and machines.
Nippon Steel President Shoji Muneoka told a news conference the company now expects to cut output by 4 to 4.5 million tonnes in the October-March second half of the business year, a record high and up from previously announced plans to cut by 2 million tonnes.
A reduction of 4 million would cut output by about a quarter from the 16.5 million tonnes produced in the first half.
Japanese carmakers and other clients have been further reducing output since the turn of the year, as they grapple with high levels of stocks, Muneoka said. We need drastic output cuts to reduce our own stocks and prop up the market.
He reiterated that Japan's steel market won't start recovering until April at the earliest, after automakers' stocks are lowered to appropriate levels and they boost production to match real demand.
We are now seeing the worst, he added.
Japanese automakers are expected to further reduce output over the next several months as car sales show no signs of recovery.
Toyota Motor Corp (7203.T), Japanese steelmakers' biggest customer, last week said it would cut production at several North American plants over the next several months in a bid to halve its inventory of vehicles.
The Asahi newspaper reported that Toyota is planning to halve domestic production in February-April from a year earlier in response to slumping global sales.
Muneoka said that Nippon Steel would bring forward a planned suspension of a blast furnace in Oita, southern Japan, by one month to February for maintenance and expects to restart it in May.
Shares of Nippon Steel closed down 5 percent at 265 yen in line with the iron and steel subindex .
Steelmakers including No.1 ArcelorMittal (ISPA.AS) (MTP.PA), No.4 POSCO (005490.KS) and Japanese rival JFE Steel Co of JFE Holdings Inc (5411.T), have also announced output cuts. (Reporting by Yuko Inoue and Mayumi Negishi; Editing by Brent Kininmont)
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