Steel shortage in Japan; CLF and other steel plays benefitting today. Cleveland-Cliffs mines low-grade iron ore and process it into high-grade iron ore pellets. These pellets are then shipped to integrated steel making plants where they are mixed with coke and limestone and fired in a blast furnace to make molten iron, the first step in the steel making process.
While this shortage may be a problem specific to Nissan and its overly tight supply chain, the steel market is tight everywhere, reflecting in large part the huge demand in China for steel and raw materials used to make steel.
Value Line recently ranked general steel the number one ranked industry. CLF was listed on their "timely stocks in timely industries" list.
stockcharts.com[h,a]daclyiay[pc21!d10,1!f][vc60][iut!Lg!La12,26,9]&pref=G
November 26, 2004
Japan's steel crisis forces Nissan to cut car production
From Leo Lewis in Tokyo
JAPAN’S two biggest steelmakers admitted for the first time yesterday that they were unable to satisfy demand, forcing Nissan, the carmaker, to cut its fourth-quarter production target by 30,000 vehicles.
Nippon Steel and JFE, already producing at maximum output, have failed to keep up with Japan’s export boom and the global shortage of materials. Although both companies are on course for record profits this year, they have been forced to concede that they have run out of capacity. The steel drought coincides with record high prices for three other critical commodities: oil, coal and iron ore.
The sudden supply crisis has forced Nissan to close three of its main factories in Japan for five days over the coming fortnight. The carmaker is also understood to be planning a production cut of 30,000 vehicles in the last quarter of fiscal 2004.
Earthquakes and other natural disasters have occasionally halted Japanese car production in the past, but the big manufacturers have, until now, always weathered materials supply shortages.
The plant closures are seen as a spectacular setback for Carlos Ghosn, the president of Nissan, whose high-profile resurrection of the company was based on a realignment of its relationship with suppliers. The plant closures alone are expected to delay production of 25,000 new vehicles whose popularity is pushing Nissan’s growth.
Economists are concerned that the steel shortage could produce yet another obstacle to Japan’s faltering recovery. Tightening steel supplies have already begun to affect industries outside the auto sector: electronics companies particularly have been unable to respond to rising export demand because they have no scope to increase output.
The Ministry of Economy, Trade and Industry (METI) estimates that in the final quarter of this calendar year, total steel demand will outstrip planned production by several hundred thousand tons.
Steel analysts at Morgan Stanley, the investment bank, believe that the supply crisis will remain severe well into next year, particularly in the high grades of steel for which the Japanese manufacturers are famous. Even efforts by the automakers to source high-grade steel plates from suppliers near their factories around the world will depend on those suppliers having quantities of high-grade slabs and coils that can be made only in Japan.
Several factors lie behind the steel shortage, of which booming vehicle exports are a major contributor. Toyota, Honda and Nissan have enjoyed a long period of high growth as they push into Asia and continue to make big inroads into American and European markets. China’s surging economy, preparations for the Beijing Olympics and Shanghai Expo have had a profound effect on demand for construction-grade steel. China has also driven a trade-related boom in shipbuilding, for which Japanese steelmakers are also key suppliers.
But it is China’s rapid growth that has particularly increased the scale of the materials supply problem. Coal and iron ore prices have soared in response to China’s voracious appetite.
JFE yesterday unveiled plans to boost its annual capacity of crude steel by 10 per cent next year from its present level of 27 million tons. Efforts will centre on the group’s plant in Hiroshima, where both the casting and cooling process will be speeded up to increase daily output.
Nippon Steel is trying to boost output of raw steel by two million tons a year, but work to re-tool its mills will probably not be completed until next summer.
business.timesonline.co.uk |
