Posted on 30 Jan 2016
Sales apparently slipped about 10% to around 3.7 trillion yen. Nippon Steel amassed pretax profit of 343.1 billion yen in the year-ago period, but now is finding it harder to secure healthy margins from exports, and gains stemming from the weak yen are being wiped out.
The market downturn is tied to China, where steelmakers continue to overproduce even as the economic slowdown has sapped demand. China's steel exports topped 100 million tons in 2015, setting a record. Much of the cheap excess steel is finding its way to Southeast Asia.
Cratering prices for iron ore also are hurting earnings. The average procurement price apparently was around $55 per ton in the April-December period, about half that of a year earlier. Valuation losses on inventories have ballooned.
Investments in energy development projects have stalled in North America and elsewhere due to falling oil prices. Sales of steel materials used for related items such as oil well pipes declined as a result. Dismal earnings at Usiminas, a Brazilian equity-method affiliate that makes steel, contributed to Nippon Steel's woes.
The market deterioration for steel also is hitting producers outside Japan. South Korea's Posco recorded a net loss for the year ended in December, while China's Baoshan Iron & Steel apparently saw net profit plummet 80%.
As of October, Nippon Steel projected a 45% fall in pretax profit to 250 billion yen for the full year ending in March. But it looks increasingly likely that results will be even worse. The company announces April-December results Monday.
