Japan's crude steel output rose on an annual basis in the April-June quarter for the first time in five quarters, as robust car output bolstered the sagging sector, but a strong yen currency and slowing car sales cloud the outlook for the third quarter.
Crude steel output in the second quarter rose 4.3 percent on the year to 27.5 million tonnes, a level not seen since the January-March quarter of 2011, the Japan Iron and Steel Federation said on Thursday.
Japan suffered its worst earthquake on record in March last year, which, together with a tsunami and nuclear crisis that followed, wreaked havoc on its economy and left 19,000 people dead or missing.
Domestic car production surged from disaster-hit lows last year, buoyed by government subsidies for environmentally friendly cars, while the yen's brief respite to a year-high of 84 yen at the end of March helped prop up exports during the quarter.
But the government has almost consumed the budget and is about to end the subsidies.
The industry body also expects a deceleration of the Chinese economy to take a toll of the region's economy, stepping up competition in export markets and slowing demand in other emerging markets in Asia.
"We face deterioration in market conditions both in the domestic and export markets in the following quarter," a Federation official, in charge of statistics, said on Thursday.
Speaking to reporters on Wednesday, Federation chairman Hiroshi Tomono said, "We're bracing ourselves for a backlash of the strong car output in the first half that will come later this year."
Domestic new car sales in the period from January to June jumped 54 percent from a year earlier to 2.95 million units, the highest in six years.
Crude steel output in June rose 3.5 percent from a year earlier to 9.2 million tonnes, aided by a rise of 8.7 percent in the output of electric-furnace steel makers, which produce construction steel.
It was a fourth consecutive annual gain, but June output fell 0.3 percent from May before seasonal adjustment.
Demand for long products is solid because of ongoing large development projects in the Tokyo area, the federation official said.
Output of steel sheets by blast furnace steelmakers such as Nippon Steel Corp and JFE Steel Corp for use by manufacturers slipped 1.1 percent in the first decline in four months, as the yen resumed its advance against the U.S. dollar.
Japan's trade ministry estimates crude steel output in the July-September quarter at 27.1 million tonnes, based on a survey of steelmakers and inventory levels at the end of June.
It expects a decline in Asia's steel market to curtail exports 1.9 percent from the previous three months.
Domestic passenger car production surged 60 percent from a disaster-hit low last year to 781,340 units in May.
On March 11 last year, Japan's northeast coast was struck by a magnitude 9 earthquake, and a massive tsunami that triggered the world's worst nuclear crisis since Chernobyl 25 years ago