Japan's new law, which limits overtime in the construction industry to 360 hours per year and will be valid from April 2024, is expected to negatively affect steel demand.
The construction industry, which accounts for more than 40% of domestic steel demand, faces serious labor shortages. The law, which aims to improve working conditions, could extend construction times, leading to fewer projects and a decline in steel demand.
Large construction companies are adapting to the new law by implementing measures such as eight-day site closures every four weeks. This, combined with existing factors such as rising raw material prices and labor shortages, has resulted in weakness in steel demand, which is reflected in the negative increase in orders for steel products used in construction.
The decline in steel demand for construction is expected to affect electric arc furnace (EAF) steel production, affecting scrap demand. Japan's steel industry, which is heavily dependent on EAF for construction and basic oxygen furnace (BOF) for automobiles, is facing challenges in the construction sector due to labor shortage.
Despite strong demand in the automobile sector, challenges in the construction sector have led to a downward revision of the normal steel product demand forecast in the sector for the 2023-2024 financial year.
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