Japan Electric Furnaces Post Less Profits in Apr-Dec 2006

Japanese major 11 electric furnace steel makers posted less recurring profits in April-December 2006 from the same period of 2005 except for Yamato Kogyo. Their profits decreased by 20-30% when purchasing price for ferrous scrap increased by average 4,000-5,000 yen per tonne during April-December 2006 from the same period of 2005. Yamato Kogyo gained highest profit thanks to favorable business condition at the joint company in USA, Nucor Yamato Steel Company. The 11 makers gained more than 10% of ROS (return on sales) while Topy Industries decreased. Each maker estimates their recurring profits decline by 20-30% for full business year ending March 2007, even though they have sought price hike for their products.Their profits decreased by the influence of higher costs of raw materials. Osaka Steel and Kyoei Steel were suffered from 4,400 yen per tonne of ferrous scrap purchasing price upsurge in April-December 2006 from a year ago, while Tokyo Kotetsu and Toyohira Steel were 4,000 yen and Godo Steel was 3,900 yen. Chubu Plate’s purchasing price increased by 25% and Yamato Kogyo by 21%. Ferrous scrap market price stays over 30,000 yen per tonne for H2 since autumn 2006. The price spread decreased between ferrous scrap and electric furnace products.Japanese biggest electric furnace steel maker, Tokyo Steel Manufacturing was suffered from much high price and procurement difficulty of ferrous scrap. The firm was forced to reduce production under the influence of ferrous scrap short supply and lowered the earnings estimates for fiscal 2006, decreasing the sales estimate by 11 billion yen, recurring profit by 7.5 billion yen and net profit by 4 billion yen.On the other hand, ROS kept high level in April-December, 38% at Yamato Kogyo, 20.9% at Chubu Steel Plate, 20% at Tokyo Steel Manufacturing and 19.3% at Tokyo Kotetsu. Capital adequacy ratio was also high, 79.2% at Osaka Steel, 77.3% at Tokyo Steel, 74.8% at Yamato Kogyo and 73.2% at Chubu Steel Plate. Their financial strength improved despite of the influence of higher material costs.