Posted on 21 Oct 2015
The company initially forecast an 18% reduction to 370 billion yen, but it currently faces skewed overseas market dynamics. China is the biggest steelmaker in the world, with crude steel output reaching levels of 800 million tons annually. The country's decelerating economy led to stalled domestic demand, and the excess steel is making its way to Southeast Asian countries and elsewhere.
Forced to compete against this cheap Chinese steel, Japanese steelmakers are struggling to make a profit on exports even amid the weak yen. Nippon Steel, which exports nearly half its output, is particularly exposed to worsening overseas markets.
Nippon Steel has also been slow to recover domestically. Turning out more than 40 million tons of crude steel annually, the company went on a production slowdown beginning in April in response to overloaded inventories. Demand from the auto and construction sectors remains sluggish, and the company will likely continue to adjust output accordingly. Nippon Steel may not reach its group sales goals of 5.1 trillion yen for fiscal 2015, a 9% drop from the previous year.
Pretax profit for the interim half ended in September likely fell 15% to around 150 billion yen, in line with projections. But Nippon Steel will face a difficult environment in the second half along with its Japanese competitors. Kobe Steel recently lowered its fiscal 2015 earnings outlook while JFE Holdings faces pressure on earnings because of its high export ratio.
