January 11, 2009 / 6:42 AM / 11 years ago

UPDATE 1-Nippon Steel could cut output further in downturn

(Adds details)

By Yoko Kubota

SEOUL, Jan 11 (Reuters) - Nippon Steel Corp (5401.T), the world’s second-biggest steel maker, is likely to reduce output further as it struggles with weak demand and pressures for price cuts from battered auto makers in the downturn.

“We have said 2 million tonnes, but it probably won’t stop there,” Chairman Akio Mimura told Reuters on Sunday, referring to its previous plan for production cut in its second half ending March 2009.

Nippon Steel said in November it would slash output by 2 million-2.2 million tonnes in October-March, doubling the reduction size from its initial plan unveiled in October. [ID:nT88686]

Nippon Steel could announce details of the output cut by February or March once the figure is set, Mimura said, without elaborating. He was speaking on the sideline of a meeting hosted by South Korean business associations.

Mimura’s comments came as the Asahi newspaper reported that top Japanese carmaker Toyota Motor Corp (7203.T) had decided to use steel from South Korea’s POSCO (005490.KS) in its Japanese output to cut costs. [ID:nT75667]

A deal with POSCO would be a blow to Nippon Steel and rival JFE Steel Corp, as Toyota has so far mainly relied on Japanese steel makers for its local car production.

Last month, the Nikkei said Toyota planned to ask Nippon Steel and other steel firms for a price cut of about 30 percent in light of slower steel and vehicle demand. [ID:nT156065]

The deepening global downturn has hit sales in steel-consuming industries from auto to home appliances.

In November, ArcelorMittal ISPA.AS MTP.PA, the world’s largest steel maker, doubled its output cut to some 30 percent. In December, POSCO, the world’s No. 4 steel maker, announced its first ever output cut and said on Tuesday it might cut production further in the current quarter. (Writing by Rhee So-eui; Editing by Anshuman Daga)

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