Recent Market Developments in the Japanese Steel Industry

The Japan Iron and Steel Federation (JISF) 87th Session of the OECD Steel Committee, Paris 26-27 September 2019

3.9

-7.3

0.4 2.0 5.40.6

-0.2 -1.6

2.8 0.11.1 0.8

3.41.8

2.91.3

-0.6

1.9

-1.9

1.8 2.2 1.3

-16.0

-12.0

-8.0

-4.0

0.0

4.0

8.0

12.0

16.0

14.1Q 2Q 3Q 4Q 15.1Q 2Q 3Q 4Q 16.1Q 2Q 3Q 4Q 17.1Q 2Q 3Q 4Q 18.1Q 2Q 3Q 4Q 19.1Q 2Q

(%) Change in Private Investories Net Exports of Goods and ServicesPublic Demand Private Capital SpendingPrivate Residential Investment Private ConsumptionGDP

Apr.1, 2014Sales Tax Hike5%→8%

Key Macroeconomic Indicator

1

• GDP expanded at an annualized rate of +1.3% during the second quarter of 2019. • Private consumption was boosted by longer (10-day) national holiday.• The impact of the sales tax hike is likely to be smaller than that of the previous tax hike in 2014,

thanks to mitigation measures (e.g. exclusion of daily necessities from the tax hike and a discount program with a cashless payment).

Source: Cabinet Office Note: Seasonally Adjusted Series (Contributions to Quarter-to-Quarter Percent Change in GDP, Annualized)

Oct.1, 2019Sales Tax Hike8%→10%

Real GDP Growth Rate

Steel Production and Consumption

2

Source: METI

• Crude steel production is gradually normalizing after constraints caused by a chain of natural disasters since the second half of 2018.

• Apparent steel consumption remains firm.

Crude Steel Production Apparent Steel Consumption(Crude Steel Equivalent)

Source: JISF

0.0

5.0

10.0

15.0

20.0

1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q

2014 2015 2016 2017 2018 2019

(Million T)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q

2014 2015 2016 2017 2018 2019

(Million T)

Steel Trade

3Source: JISF

• Steel export, which had been dragged by supply-side issues (e.g. natural disasters), bounced back, albeit still stagnant.

• Steel import remains high.

Steel Export (Crude Steel Equivalent) Steel Import (Crude Steel Equivalent)

0.0

0.5

1.0

1.5

2.0

2.5

1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q

2014 2015 2016 2017 2018 2019

(Million T)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q

2014 2015 2016 2017 2018 2019

(Million T)

Steel Orders by Segment

4

Source: JISFNotes: Data are on an ordinary steel basis (excluding specialty steel)

Indices of Ordinary Steel Orders by Segment

• Steel orders from construction, industrial machinery, and automobile sectors have been stagnant recently after making a moderate growth until mid-2018, while orders from shipbuilding sector have been gradually increasing along with recovery of shipbuilding activities.

5

Current Imbalances

Current Imbalances-1

6

Infrastructure Investment Manufacturing Investment+ ―

Long Products Flat Products+ ―

Current Imbalances-2

7

Raw Material Prices Steel Product Prices+ ―

Source: World Bank

Index of Flat Steel Price

50

75

100

125

150

175

18.1 6 19.1 7

Iron Ore Price (Jan-18=100)

Index of Iron Ore Price

Source: CRU

50

75

100

125

150

175

18.1 6 19.1 7

CRU Flat Steel Price Index (Jan-18=100)

8

Thank you for your attention