Japan Major Electric Furnaces Post Lower Profit in 1H

Japanese major 8 electric furnace steel makers out of 16 firms posted lower recurring profit and 2 makers got into the red for a half year to September compared with the same period of 2007. They reduced the profit despite of higher selling price when ferrous scrap purchase price increased by 20,000-25,000 yen per tonne or 50-70% for the half year compared with the same period of 2007. The 14 makers’ return on sales (ROS) lowered by 2.8 percentage points to 7.9%. The major 11 makers expect higher sales and profits for the full year to March 2009.

Their operating performance was swayed by sensitive ferrous scrap price for April-September. Ferrous scrap purchase price started at around 55,000 yen per tonne in April and hit above 70,000 yen in July, while dropped to about 30,000 yen in September. The 4 shaped steel makers increased ROS while the 12 rebar makers decreased ROS.

Their net sales renewed the record thanks to rising selling price. The unit selling price was 106,500 yen per tonne for Tokyo Steel Manufacturing at the end of September, higher by 33,200 yen from a year earlier, 98,500 yen for JFE Bars & Shapes, higher by 27,200 yen, and 94,244 yen for Godo Steel, higher by 26,366 yen. Increased steel product and billet exports pulled up their sales during April-September.

The 5 major makers increased the recurring profit for April-September while they decreased the recurring profit for the same period of 2007. But they may revise down the performance forecast for a full year with the movement of steel product and ferrous scrap prices.

Steel product market price already turned downward. The demand is also declining due to condominium building sluggish sales, general contractors’ conservative buying or world economic downturn. Japanese electric furnaces’ purchase prices of ferrous scrap fell below 10,000 yen per tonne. Meanwhile, ferrous scrap price shows sign to rise when Turkish electric furnaces started procurement from USA in large quantity again.