Japan Integrated Steels Suffer from High Raw Material Cost

Japanese 5 integrated steel makers posted higher consolidated recurring profit for April-December 2010 compared with same period of 2009. However, Nippon Steel revised the consolidated recurring profit target downward by 30 billion yen for fiscal 2010 ending March 2011 from former target as of October 2010. Sumitomo Metal Industries revised the target downward by 40 billion yen and JFE Holdings reduced the target by 50 billion yen from former target. The all of 5 firms including Kobe Steel and Nisshin Steel expect lower profit of steel unit for January-March from October-December when higher raw material cost and slower steel price increase reduce the margin. The 5 firms expect less than 40% profit of steel unit compared with the level before Lehman shock while the firms expect the steel output is more than 90% of the peak.

Sumitomo Metals announced on Friday the firm’s consolidated recurring profit for fiscal 2010 would decrease from former target due to lower equity method income, trouble of blast furnace at Kashima steel works and slower demand. The decrease in the profit is mainly for onetime charges including 18 billion yen for lower equity method income and 17 billion yen for trouble at Kashima.

The firm posted 2 billion yen of consolidated recurring loss in October-December compared with 9.4 billion yen of the profit in April-June and 19.4 billion of the profit in July-September when the lower sales due to trouble at Kashima steel works and the higher raw material cost. The firm expects raw steel output increases to 3.7 million tonnes for January-March from 3 million tonnes in October-December. The firm expects the output in fiscal 2010 is around 13.5 million tonnes compared with former target of 13.9 million tonnes as of October 2010.