Nippon Steel, the world’s third-largest steel-maker has recently reduced its estimate for annual crude steel output by 2% for the ongoing financial year to be ended in March 2019. The company has forecasted that the same would decrease from 42.1 MnT in FY18 to 41.3 MnT in FY19 mainly because of troubles at its mills.
As referred by the senior management, these troubles refer to lower quality raw material as well as the difficulties in producing value-added products such as high-tensile steels that can’t be processed in the same volumes as lower-quality metal.
Apart from this, Nippon Steel has also warned that its annual profit would be 6% less than the previous forecast because of lower crude steel output. The company now estimates its annual profit will be 330 billion yen (USD 3.01 billion), down from its earlier guidance of 350 billion yen, under International Financial Reporting Standards (IFRS).
In terms of raw material costs, the company’s management has mentioned that the impact of the increase in iron ore prices due to Vale’s dam collapse may affect the company’s earnings in next financial year starting from 1 Apr’19 as it usually enters into futures contracts for raw materials.
The cut down in Nippon Steel’s profits and crude steel output follows a similar move by its peers such as Kobe Steel and JFE Steel. Although Japan’s domestic steel demand from automakers and construction sector is quite healthy due to 2020 Tokyo Olympics, natural disasters and glitches in their aging facilities have hampered their planned crude steel production.
Nippon Steel is set to start new blast furnace, already built in Wakayama in western Japan, in mid-February in order to boost its steel output. It will replace the existing 31-year-old blast furnace at the plants, which is the world’s oldest blast furnace in operation.
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