Posted on 28 Jul 2010
Nippon Steel gives cautious outlook, eyeing China
Nippon Steel Corp, the world's No.4 steelmaker, joined world No.1 ArcelorMittal in warning that a slowdown in China could hurt future earnings, forecasting a full-year profit that missed market consensus.
Steep price declines in China are forcing steelmakers to cut output, and the market could slide into deeper oversupply as Beijing tightens policy and moves to curb exports.
"We are closely watching when destocking, realignment and various other adjustments in China will come to an end. We expect when things stabilize in China in the second half, Asia's steel market will recover," Nippon Steel Executive Vice President Shinichi Taniguchi told a news conference.
Nippon Steel, Japan's top steelmaker, reported improved earnings for the fifth straight quarter but predicted a full-year profit of 250 billion yen, missing the consensus for around 316 billion yen in a poll of 17 analysts by Thomson Reuters I/B/E/S.
Asia's other steel giants are in the same quandary.
South Korean rival POSCO, the world's No.3 steelmaker, earlier this month posted its second-best quarterly earnings, but warned second-half profit would fall 30 percent as steel prices crumble on weak Chinese demand.
Xu Lejiang, chairman of Baosteel, the world's second-biggest steel producer last year, has said China's steel industry faces its toughest time of the year this quarter, citing high iron ore prices and sluggish steel demand.
Asian steel mills are also being hurt by a new pricing scheme for raw materials that has increased earnings volatility.
A switch to quarterly pricing deals for inputs such as iron ore and coal has made earnings more volatile, prompting some analysts to downgrade steelmakers in Japan.
