By Masumi Suga and Yasumasa Song, Reuters
Nippon Steel Corp. and JFE Holdings Inc., Japan’s two largest mills, cut their full-year profit forecasts after prices fell and record rains and floods in Australia pushed up the cost of steelmaking coal.
Net income at Nippon Steel will be about 95 billion yen ($1.15 billion) for the financial year ending March 31, missing its Oct. 27 estimate of 130 billion yen, the Tokyo-based company said today in a statement. JFE reduced its full-year profit forecast by 36 percent to 70 billion yen.
Coking coal prices may rise as much as 78 percent next quarter on disruptions from flooding in Australia, the Bank of America Merrill Lynch said. Japanese steelmakers, which rely on Australian imports for about 60 percent of their coking coal, are seeking alternative supplies from North America and Russia. Iron ore prices have more than doubled in the past two years.
“In addition to rising raw material prices, tightening coking coal supplies due to heavy rains in Australia pushes up costs,” Yoshio Ishikawa, executive vice president, told reporters today in Tokyo.
Third-quarter profit rose to 33.4 billion yen from 25.9 billion yen a year earlier, Nippon Steel said in the statement. JFE Holdings reported a 32 percent decline in quarterly profit to 18.5 billion yen, according to Bloomberg calculation based on the nine-month result released today by the Tokyo-based company.
JFE shares dropped 3.3 percent to 2,643 yen, the biggest decline since Aug. 31 as of the 3 p.m. trading close on the Tokyo Stock Exchange. Nippon Steel fell 2.1 percent to 285 yen.
Weak Prices
Nippon Steel expects the average price of steel will remain little changed at about 81,000 a metric ton in the current quarter, after a 5.8 percent decline from the previous quarter ended Dec. 31, according to its statement. The average price JFE got for its steel fell 2.8 percent to 79,300 yen in the third quarter from the previous three months and is expected to be about 79,000 yen this quarter.
While market prices are rising, the company’s contracted product prices little reflect this gain, Nippon Steel Executive Vice President Shinichi Taniguchi said today. The company plans to raise prices in April, he said, without giving details.
China’s domestic prices for hot-rolled coil, a benchmark steel product, were unchanged at 4,868 yuan a ton today, according to Beijing Antaike Information Development Co. They have risen about 25 percent in the past six months.
Posco, South Korea’s largest steelmaker, this month reported a worse-than-expected drop in quarterly profit after raw material costs gained and demand from builders and home- appliances makers waned.
Australian free-on-board coking coal prices may increase to $400 a metric ton for three-month contracts starting April 1, from $225 a ton this quarter, Merrill Lynch analysts led by Sydney-based Alex Tonks said in a report dated Jan. 25. This compares with the bank’s Jan. 11 forecast of $330 a ton for the second quarter.
Still, the weather’s “impact on coking coal won’t likely continue,” once the season changes, and the short term cut in steel output caused by the flooding will help steelmakers boost prices, according to Shinya Yamada, an analyst at Credit Suisse Securities Japan Ltd.
Flooding has inundated about three-quarters of Queensland, shutting mines, damaging crops and prompting BHP Billiton Ltd. and Rio Tinto Group to declare force majeure, a legal clause that allows producers to miss deliveries. The region is the world’s largest exporter of seaborne coal.
Sumitomo Metal Industries Ltd. and Kobe Steel Ltd., Japan’s third- and fourth-largest steelmakers, are scheduled to report nine-month results and full-year outlook on Feb. 3. (sourced:Bloomberg)
Posts
No comments:
Post a Comment