Posted on 03 Nov 2022
Announcing its H1 business results on Tuesday, Nippon Steel said its consolidated business profit for the first April-September half of this fiscal year rose by over 13% from H1 last year, despite a slowing global economy, a weakening Japanese currency and lower crude steel output. However, Japan's largest integrated steelmaker indicated that its full-year results for fiscal 2022 (ending March 31 next year) will be less rosy.
During the six months to September, Nippon Steel's consolidated crude steel production (including that of group companies such as mini-mill Osaka Steel) reached 20.21 million tonnes, significantly lower than output during H1 last year of 23.25 million tonnes. Consequently, for the full year ending next March, the company is forecasting crude steel output of around 40 million tonnes on a group basis, some 4.4 million tonnes down on last fiscal.
Yet despite the reduced output during H1, savings from internal restructuring and capacity reductions, combined with a jump in steel prices during the six months, enabled the company to earn a consolidated business profit of Yen 541 billion ($3.6 billion) during the period, higher by 26% YoY and a record for a first half, it said.
Significantly, the company calculated that the average unit price of its steel products during H1 was Yen 146,000/tonne, some 27% higher than April-September last year. For the current half, Nippon Steel is expecting average prices to climb further to Yen 158,000/t.
However, Japanese steel consumption is likely to shrink further, the company admits, dipping to 55.1 million during the year to next March from 51.18 million tonnes last fiscal, with the decline in steel used in construction contributing significantly to the fall. Japan's construction sector will consume 19.7 million tonnes of steel this fiscal, down from 20.1 million in fiscal 2021, it notes.
On the other hand, the company expects that its export ratio of steel products (value basis) will average 43% during this half, down only slightly from the 45% average during H1 but up on the 40% average during H2 last fiscal.
The export forecast is interesting because by forecasting a very similar export ratio, Nippon Steel seems confident it can ride out any decline in global steel demand. Moreover, though the weakening Yen is causing massive headaches for its raw materials purchasing team, the company is also earning more from dollar-denominated steel exports.
During H1 this year, the exchange rate averaged Yen 132=$1, with the Japanese currency softening considerably from the average during H1 last fiscal of Yen 110=$1. For the current October-March half, Nippon Steel expects the dollar to strengthen more to Yen 150=$1.
For its full year till next March, Nippon Steel is forecasting a consolidated business profit of Yen 870 billion, higher by Yen 70 billion from its earlier fiscal 2022 guidance issued in August, but lower by more than 7% from last fiscal's Yen 938 billion.
Source:Mysteel Global
