Industry conditions, 2008 → 2009
(A: excellent, B: good, C: fair, D: bad, E: slump)
PETROLEUM PRODUCTS E→D
With economies around the world in downturns, the sluggishness in auto sales is seen as persisting, and exports to other Asian markets are likely to lag, resulting in weak demand for petroleum products. But lower oil prices will contribute to a recovery by improving the terms of trade.
CHEMICALS D→E
As large-scale petrochemical plants in the Middle East and China come on line, there is fear of even greater looseness in the global market. Domestic producers will be forced to cut back on output, and the profit picture will be bleak.
PLASTIC PRODUCTS D→E
Demand for plastics is expected to remain soft, reflecting downturns in auto and consumer electronics sales in the wake of the financial crisis. Exports to Europe and the United States are particularly sluggish, and manufacturers are rushing to cut production.
STEEL C→E
Domestic demand from auto and machinery makers is likely to contract. External demand, notably for exports of steel products to China and other emerging economies, will slow. Steelmakers will be forced to slash production, and ongoing downward pressure on prices will probably contribute to further declines in profits.
CEMENT E→E
Demand is seen as remaining soft due to such factors as the decrease in public works, reduction in capital investment by recession-hit businesses, and weak condominium sales.
NONFERROUS METALS C→D
Large declines are foreseen in major categories of domestic and external demand, including building materials, cast products for auto components, and foil for electronic parts. In addition to production cuts, makers will likely face ongoing price declines amid soft market conditions, causing profits to fall.
ELECTRONIC PARTS E→E
Demand is likely to decline globally for such products as flat-panel TVs and digital cameras. Meanwhile, the emergence of overseas manufacturers will intensify competition. Regrouping of companies within the industry may pick up speed.
SHIPBUILDING C→D
Shipbuilders still have backlogs of orders on their books, but new orders have plunged. Profits from the building of ships to be launched in the first half of 2009 will be hurt by last year's hikes in steel product prices.
AUTOMOBILES D→E
The domestic market will probably be sluggish, and weak global markets will mean sharply decreased exports. Production cutbacks will leave automakers with excess staffing and capacity, and their profits are bound to suffer.
CONSTRUCTION MACHINERY C→E
Demand is likely to lag, both domestically and in exports to emerging economies and other markets, in the face of recessionary weakness in the housing market and delays in mine development due to falling resource prices.
PAPER AND PULP D→D
Demand for regular paper for advertising will probably fall in response to the global economic downturn. Higher costs of materials and fuel were passed through in the form of price hikes in 2008, but this year will likely bring pressure to cut prices.
FOOD C→C
Higher costs of materials last year have been included in product prices. The rise of the yen and decline in material costs are now improving profitability. Concerns remain about the possibility of further incidents relating to food safety.
APPAREL D→D
The domestic market remains saturated, and higher wage and other costs cannot readily be passed through. Uniqlo, H&M, and other manufacturer-retailers will probably keep up their solid performance.
LUMBER D→D
The recession means sluggish demand for lumber for residential construction, and the strong yen means greater competition from imports; profitability is likely to decline.
INFORMATION SERVICES C→D
Demand for investment in information technology, including renewal of existing systems, should remain strong. But the global downturn will mean smaller appetites for new IT investment from such leading demand sources as the financial services, automobile, and electric power industries.
REAL ESTATE D→E
Condominium sales will probably lag, with prices staying high even under recessionary conditions. Office building vacancies are likely to rise and rents to fall gradually.
CONSTRUCTION E→E
The combination of sluggish construction demand, high prices of materials, and credit contraction is liable to lead to more bankruptcies. The regrouping and weeding out of companies in the industry are likely to progress.
RETAIL C→D
With consumers aiming to save money and the operating environment remaining harsh, we may see further regrouping and consolidation among retailers. Grocery supermarkets should do relatively well, thanks in part to the return to home-prepared meals in the face of heightened concern about food safety.
ELECTRIC POWER D→C
Industrial demand from major users of power is likely to lag because of production cuts. Demand for domestic electricity should be firm, reflecting the rising share of all-electric homes. Higher electric utility charges and lower fuel prices will improve power companies' profitability.
LOGISTICS C→D
Overall logistics demand will probably fall in the face of lagging consumption and decreased production due to the recession. Improved productivity from lower fuel costs will be offset by lower unit prices for freight in response to decreased demand, making it difficult for companies to improve their financial performance.
(Economic Research Team, December 15, 2008)
