Reference News Network, December 24 report: According to the "Nikkei Business Daily" on December 18, structural challenges brought about by population decline have begun to have a significant impact on Japan's domestic commodity markets. By 2025, the contraction of domestic demand has disrupted the prices of raw materials such as steel and chemicals, and rising costs due to labor shortages have affected real estate prices such as apartments. Japanese agriculture is also affected by a lack of successors and abnormal weather. Facing a "shrinking Japan," can we find an optimal solution to balance supply and demand?

The Mizuho Bank's Industry Research Department, responsible for economic analysis, released the "Mid-term Outlook for Japanese Industries" report at the end of November, which has attracted widespread attention. The report predicts market trends up to 2030 and points out that both demand and production will shrink.

The report makes predictions for various industries, including chemicals, steel, and automobiles. For example, the Japanese steel industry will be affected by the decline in domestic demand caused by population reduction, while the chemical industry will face a situation where "foreign export growth occupies overseas markets."

Faced with a continuously shrinking market, the industry has not been passive. In the steel industry, Nippon Steel reduced its number of blast furnaces from 15 to 10 over a five-year period ending in fiscal year 2024, and its capacity was also reduced by 20%. JFE Holdings temporarily closed one blast furnace located in Kurashiki City, Okayama Prefecture, and will end the operation of another blast furnace in Fukuyama City, Hiroshima Prefecture in the fiscal year 2027.

Even so, the speed of demand decline far exceeds the pace of corporate voluntary production cuts. Mizuho Bank predicts that by 2030, Japan's crude steel production will drop to 73.7 million tons, a near 10% decrease from 80.3 million tons in 2025. The approximately 7 million tons of reduced crude steel is equivalent to the output of two blast furnaces.

Japan's labor shortage has led to stalled construction projects, resulting in reduced steel transactions. Since the second half of 2024, the prices of main steel products such as plates and sections have continued to fall. Although the number of blast furnaces is decreasing, more importantly, electric arc furnace steelmaking companies primarily producing building materials have failed to promote integration.

Overcapacity is a common issue in the industrial raw materials sector. According to statistics from the Japan Cement Association, Japan's domestic cement capacity reached 47.06 million tons by 2025. However, the domestic demand in fiscal year 2025 is only 32 million tons. Although Shinko Cement and Ube Mitsubishi Cement began reducing production as early as 2023, the problem of overcapacity still exists. Currently, overcapacity is being alleviated through exports.

In the paper industry, the demand for printing paper used for publishing and advertising continues to decline. Nippon Paper Industries Co., Ltd. and Prince Corporation are shutting down some equipment, but many people believe further capacity reductions are needed.

The Japanese chemical industry has experienced fundamental changes this year. In February, Idemitsu Kosan announced it would close one ethylene unit before the fiscal year 2027 to reduce its basic chemical ethylene production capacity. In August, Asahi Kasei, Mitsui Chemicals, and Mitsubishi Chemical Group established a preparatory organization, planning to achieve integration around 2030.

Data from the Japan Petrochemical Industry Association shows that the proposed integration and phase-out plans are expected to reduce ethylene annual supply capacity by nearly 30%, dropping from the current 6.16 million tons to 4.4 million to 4.5 million tons by around 2030. This will be a large-scale production cut, the first in ten years since the reduction of 1.2 million tons of capacity between 2014 and 2016.

This year, Mitsui Chemicals, Idemitsu Oil and Chemical, and Sumitomo Chemical announced business integration plans and reduced the supply capacity of general-purpose synthetic resins using ethylene as a raw material. It is expected that the capacity reduction in the resin industry will continue. Kazuo Kudo, president of Asahi Kasei and chairman of the Japan Petrochemical Industry Association, described 2025 as "a year when the future is already clear."

Production cuts are not limited to general products; companies are also taking measures to strengthen the production of high-value-added products. A chemical company executive revealed, "Although this will increase manufacturing costs, we are increasing our efforts in R&D of specialty chemicals to meet customer needs."

Nippon Steel announced its mid-to-long-term business plan for the fiscal year 2030 on the 12th. This plan does not include further measures to cut domestic production capacity, but rather indicates its commitment to jointly develop new products with a wide range of customers, including automobile manufacturers. Nippon Steel President and COO Masahiro Imai stated that the previous blast furnace shutdowns have fully enhanced the competitiveness of Japan's domestic production base and said, "We will make the most of the restructured production structure in the next five years."

Given the expectation of a continuing market contraction, merely matching supply with demand through production cuts may lead to declining profits. To maintain competitiveness, each industry cannot be satisfied with just "streamlining." (Translated by Liu Lin)

Original: toutiao.com/article/7587331355017789967/

Statement: This article represents the views of the author themselves.