Posted on 03 Nov 2015
Weak steel prices are hurting export profitability of steelmakers here, which had been following a recovery path until the last fiscal year.
The bad news was uncovered when Japan's major three steelmakers announced their earnings for the April-September period.
Nippon Steel & Sumitomo Metal, JFE Holdings and Kobe Steel downgraded forecasts for the full year ending March 2016. The three firms' pretax profit forecasts for fiscal 2015 are 405 billion yen ($3.33 billion) in total, down nearly 50% from a year ago. When they announced their April-June quarter results, the figure stood at 665 billion yen, a decline of over 10% on the year. At that time, one executive at Nippon Steel & Sumitomo Metal said, "We aim for higher profits."
Despite their positive outlooks, China's excess steel brought a heavy blow, dragging down prices of Asian steel and spoiling Japanese steelmakers' expectations.
In Southeast Asia, hot-rolled coil prices have dropped by $40 to $50 since July, said Nippon Steel & Sumitomo Metal Executive Vice President Katsuhiko Ota. He said he could not remember seeing such a thin profit margin.
China is the world's biggest crude steel producer, with its annual output reaching 800 million tons. With the country's domestic demand slowing, 100 million tons of the volume appears to be finding destinations in Southeast Asia and elsewhere.
The Chinese export push is causing a deterioration of market conditions, making it difficult for Japanese steelmakers to maintain their profitability.
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"Our export volume will decline," said Kobe Steel's Executive Vice President Naoto Umehara.
Given that Japan's steel demand is not so strong, the three Japanese companies' parent-only crude steel output will all log a year-on-year decrease.
