Japan July-Sept crude steel demand seen up 1.5 pct

Thu Jun 30, 2011 8:41am GMT

* Demand for Q2 steel products seen up 7.1 pct Q/Q
* Inventory levels remain high - trade ministry (Adds trade ministry comment)

TOKYO, June 30 (Reuters) - Japanese demand for crude steel in July-September will be just 1.5 percent higher than the previous three months despite a robust recovery in the manufacturing sector as inventory levels remain high, the trade ministry said on Thursday.

A government survey of domestic steel users, such as carmakers and electric appliance makers, in combination with high inventory levels point to total demand for crude steel of 26.92 million tonnes for the period, the second quarter of the 2011/12 financial year, the ministry said.

That would be down 1.6 percent from the same period a year ago.

"Japanese carmakers are planning big production increases during the period as their damaged supply chains have come back online, but the level of inventories is very high," Masaki Koito, director of the ministry's Iron and Steel Division, said at a news conference.

The government expects demand for steel products to grow 7.1 percent in July-September compared to three months earlier, pulled higher by a 27 percent jump in demand from the car sector.

But domestic inventories of steel products are estimated to stay at around 5.56 million tonnes at the end of June, slightly below the end-May level of 5.63 million tonnes, Koito said.

(Reporting by Yuko Inoue; Editing by Joseph Radford, Thomson Reuters)