Japan steelmakers set for sharp profit recovery as global demand surges

Kobe Steel

12/08/2021 11:33

By Yuka Obayashi
    TOKYO, Aug 12 (Reuters) - Japanese steelmakers are on track
for a V-shaped annual profit recovery from the pandemic-induced
slump, as solid global demand boosts prices while higher prices
of iron ore and coking coal drive hefty inventory appraisal
gains.
    Japan's second-biggest steelmaker, JFE Holdings  5411.T , on
Thursday nearly doubled its annual net profit forecast following
similar upgrades by Nippon Steel  5401.T  and Kobe Steel
 5406.T  last week.
    JFE now expects a net profit of 240 billion yen ($2.2
billion), its highest since 2007/08, against its May estimate of
130 billion yen and a loss of 21.9 billion yen last year.     
    "We doubled our profit estimate in the steel segment as
product prices are rising to reflect higher material costs and
strong overseas steel markets," JFE Executive Vice President
Masashi Terahata told reporters, citing one-off valuation gains
on its materials inventories are another reason.  
    "Steel demand is expected to continue a gradual recovery
through March."
    Last week, JFE's larger rival Nippon Steel raised its profit
guidance by 54% to 370 billion yen to mark the highest since its
acquisition of Sumitomo Metal Industries in 2012.  urn:newsml:reuters.com:*:nXB0M2K1GA
    "Higher product prices and solid profits from overseas units
are behind the revision," Nippon Steel Executive Vice President
Takahiro Mori told reporters, pointing to its units in India,
the United States and Brazil. Nippon Steel booked a net loss of
32.4 billion yen for the year ended March 31.
    Steel shipments by the world's fifth-biggest steelmaker are
anticipated to grow further in manufacturing and construction in
the October-March period, Mori said. 
    Japan's No.3 steelmaker, Kobe Steel, raised its annual net
profit outlook by 60% to 40 billion yen. 
    International peers have also reported robust results as the
global economy rebounds.
    ArcelorMittal  MT.LU , the world's No.2 steelmaker by
output, booked its highest quarterly earnings in 13 years while
South Korea's POSCO  005490.KS  posted its highest ever
quarterly profit.  urn:newsml:reuters.com:*:nL1N2P509B urn:newsml:reuters.com:*:nL1N2OY02F
    Despite strong performances, Japanese mills are frustrated
because they have failed to raise product prices for major local
customers such as Toyota Motor Corp  7203.T  to pass on climbing
material costs and other expenses in their semi-annual price
negotiations.
    "We need to realise fair contractual prices to secure
appropriate margins on an international level, otherwise we
won't be able to stay responsible for stable supply to these
customers," Nippon Steel's Mori said.
   ($1 = 110.3900 yen)

 (Reporting by Yuka Obayashi; editing by Jason Neely)
 ((Yuka.Obayashi@thomsonreuters.com; +813-4520-1265;))