Japan's manufacturing slows in May amid lower automotive steel demand

Japan's manufacturing sector slowed in May, amid lower steel demand from vehicle producers, as the au Jibun Bank Japan purchasing managers' index compiled by S&P Global June 1 dipped to 53.3 from 53.5 in April, its slowest since February, according to data released June 1.

The slowdown came amid lower production by automotive manufacturers who faced supply chain issues brought on by COVID-19 lockdowns in China, especially Shanghai.

Although Shanghai ended about two months of lockdowns on June 1, China's economy is in a slump. The Caixin China general manufacturing PMI stood at 48.1 in May, up from 46 in April but still in contraction.

Due to the supply issues, as well as a shortage of semiconductor chips, Toyota Motor Corp. shut down 20 production lines at 12 plants that ran intermittently from May 9 to May 28, which was expected to result in a loss of about 150,000 vehicles in May.

Toyota has extended the shutdowns into June, covering 16 lines in 10 plants out of 28 lines in 14 plants, from June 3 to June 10.

Toyota's output cuts are expected to affect Japan's domestic steel demand, which in turn could pressure scrap demand, and may help cool the domestic scrap market further.

Platts assessed the weekly spot H2 ferrous scrap FOB Japan price at Yen 51,000/mt ($402/mt) on May 25, down Yen 4,000/mt week on week, with basis ports within Tokyo Bay, according to data from S&P Global Commodity Insights.

Likewise, the reduced automotive production has raised concerns among Japanese steelmakers such as Tokyo Steel, which was pessimistic about a recovery in automobile production amid high stock of steel plate.

April, which marks the first month of the Japanese financial year, saw most vehicle makers posting year-on-year drops in production.

On May 30, Toyota posted a 7.7% annual fall in global production for April to 826,287 vehicles, while Nissan Motor Corp. declared a 26.5% fall to 207,268 vehicles and Mazda Motor Corp. saw its output plunge 49.9% to 46,675 vehicles.

Amid the lower vehicle output, Japan's April crude steel output fell 4.4% year on year and 6.1% from March to 7.47 million mt, data from the Japan Iron and Steel Federation showed May 23.