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Increasing exports from Japan steel mills to further pressure prices

Reuters reported that Japan's top steelmakers reported higher first half earnings last week, but slowing demand and bloated stockpiles could push them to sell more overseas, adding to a global glut pushing down prices further

Nippon Steel & Sumitomo Metal and JFE Holdings respectively, said earlier last week they expect a pickup in building and vehicle sales but analysts were not so sure the domestic market will strengthen enough to cut inventories which stood at a 13 year high at the end of September. And steelmakers are slowly turning to overseas markets.

Mr Keiju Kurosaka, senior analyst at Mitsubishi UFJ Morgan Stanley said that "The biggest worry is the output adjustment by automakers. There is a risk that spot product prices will fall into a downward spiral. They don't want to cut output because it would boost their fixed costs. They would rather step up exports.”

Nippon Steel and JFE plan to boost crude steel output to 46.1 million tonnes and 29.2 million tonnes, respectively, the highest since 2007 before the start of the global financial crisis.

Japan's exports of steel products rose for the first time in 13 months in September to 3.74 million tonnes, competing with a flood of Chinese steel.

Prime Minister Mr Shinzo Abe's sales tax hike in April has hit economic growth and consumer spending harder than expected, hurting sales in two sectors important for steelmakers, automotive and construction. In a stark admission of the tax hike's harsh impact, the Bank of Japan surprised global financial markets on Friday by expanding its massive stimulus spending. Doubts, however, remained on how effective the move will be.