TOKYO: Japan’s three major steelmakers all suffered a plunge in pretax profit for the fiscal year ended in March, and they expect only more trouble amid sluggish demand despite some bright signs in the market. Nippon Steel & Sumitomo Metal said Thursday that pretax profit fell 56% to 200.9 billion yen ($1.85 billion). Kobe Steel plummeted 71% to 28.92 billion yen, while JFE Holdings dived 72% to 64.23 billion yen.
China accounts for half of the world’s crude steel output. The market had hit rock bottom, but began improving once Beijing started to eliminate excess production capacity in the country. The price for hot-rolled coils, which are used widely in construction and manufacturing, has recovered to about $400 per ton from under $300 at the end of last year.
Yet Nippon Steel chose not to disclose its forecast for this fiscal year. The company is skeptical of the recovery in the Asian market and has not reduced enough of its inventory in Japan. “It’s not as though Chinese demand has surged,” Nippon Steel Executive Vice President Toshiharu Sakae said Thursday of the Asian steel market. “Steel prices may have bottomed out, but they will continue to fluctuate.”
JFE Holdings projects only a modest climb in pretax profit to 65 billion yen. “I was surprised when Chinese crude steel output surged in March, but it’s unlikely that demand would suddenly increase,” Executive Vice President Shinichi Okada said. Even if the steel market truly recovers, the companies still face rising iron ore prices. The benchmark China-bound Australian iron ore price has soared nearly 60% since the end of last year to the $60 range. Crude steel output in Japan fell for the 19th straight month in March, the Japan Iron and Steel Federation said. It will be difficult to transfer growing materials costs to the prices of finished steel products amid sluggish corporate demand.
