Japan’s trading houses brace for more pain from China steel glut

Japan’s major trading houses are facing a prolonged slump in iron ore and coking coal prices as Chinese steel exports flood into Asia and beyond, constraining profits for at least the next six months.

Executives from Mitsubishi Corp. and Itochu Corp. said a supply glut would continue into the second half of their fiscal year through March, compounding the declines in quarterly profit reported over the last week by the metals segments of every big Japanese trading conglomerate.

Steel exports from China, the world’s largest producer, have surged to record highs as a sharp downturn in the domestic property market has hurt demand. This has weighed on the price of steel and its raw materials, while tariffs imposed by the US government have also complicated the business environment.

“Looking at the current conditions of the Chinese economy and iron ore demand, I think it will take time before the market recovers,” Mitsubishi executive vice president Yuzo Nouchi said on Tuesday. Announcing its second-quarter results the same day, Mitsubishi said Chinese steel exports had this year maintained the pace set in 2024, when shipments streaked past 100 million tons.

Rivals, including Sumitomo Corp. and Marubeni Corp., identified similar headwinds in their statements. Despite governments from Vietnam and India to the European Union raising barriers to Chinese steel, exporters have found ways to maintain flows, including expanding into new markets not subject to tariffs.

“China’s dumping is expanding from Southeast Asia to the Middle East and now into Africa,” said Keita Ishii, president and chief operating officer of Itochu.

Japan itself has launched an anti-dumping probe into some Chinese and South Korean steel goods, with a final decision still pending. Ishii said it would “take some time” to feel the effects of anti-dumping measures and other trade restrictions around the world.

In contrast to steel, copper – which hit a record high of $11,200 a ton last week – could provide a bright spot in the second half of Japan’s financial year. The industrial metal is trading significantly above the $9,900 per ton that Marubeni is forecasting as its average for the next six months.

“If the current price trend continues, it will help increase net income for the metals segment by 10 billion yen ($65 million),” said Marubeni president and chief executive officer Masayuki Omoto.

(By Yusuke Maekawa)

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