It probably is for steelmakers around the world.
China’s effort to push for improving air quality might turn to be quite beneficial for global steelmakers. Nippon Steel & Sumitomo Metal Corp., the biggest producer in Japan, reported a nine-fold surge in first-half profit. This came as China’s decisive approach to eliminate pollution and eradicate industrial overcapacity pushed prices upwards with a record high level in more than five years achieved earlier this year. Posco, the largest mill of South Korea, recently expressed its optimism towards higher earnings being achieved in the fourth quarter of 2017. In China, Hesteel Co. reported profits of more than double in the first nine months year-on-year.
The net income of Nippon Steel almost reached JPY 100 Bn (99.15), equivalent to USD 868 Mn in the first six months of this fiscal year (April – September). This has been a massive improvement, compared to last year’s net income of JPY 11 Bn a year before. This was also much higher than the JPY 85 Bn earlier anticipated (July’s forecast). The company now expects full-year net profit to increase 30 per cent and to reach JPY 170 Bn.
The improvement in export margins for Japanese steelmakers has been linked to Chinese markets having been much tighter than earlier expected. The production curbs in China together with the more resilient domestic demand meant huge reduction in steel exports in 2017, having fallen to the lowest in the last four years. Based on recent comments by officials, the country will proceed with the production reductions while preventing shuttered or illegal plants from returning to the industry. China currently produces half of the global steel.
In parallel to the global steel industry returning to profit after the massive losses suffered in 2015, the outlook has become rather difficult for Kobe Steel Ltd., the third largest producer in Japan. This came after the company admitted that it has been publishing fake data on metal products for years. Kobe earlier forecasted net income of JPY 35 Bn for this fiscal year, but the company now considers adjusting that as it can’t gauge the impact caused by the scandal. Nippon Steel confirmed that it will continue its alliance with Kobe, but it’s not considering any financial support for Kobe.
Kobe Steel is about to report earnings, while the second-biggest producer of the country, JFE Holdings Inc., is scheduled to release profits on November 1st. No competitors of Kobe have ever reported a similar issue with fake data so far. According to Nippon Steel, operating profit increased 461 per cent, having reached JPY 100 Bn in between April and September, with sales up 27 per cent to JPY 2.75 Tn.
According to Nippon Steel, demand will stay firm in Japan, mainly driven by the auto industry, construction and civil engineering. In the meantime, they expect overseas demand to remain robust. The company’s shares improved about 7 per cent year-on-year, behind gains of around 40 per cent for compatriot JFE and 30 per cent for South Korean Posco.
Source: Hellenic Shipping News.