Asia Major Steels Post Low Profit in Jan-Mar

Asian major steel makers reported less profitability in January-March from same period of 2010 when iron ore and other raw materials cost surged and Chinese steel selling price decreased under slower growth the government’s cool down policy. The raw materials cost increases in April-June while the demand decreases for automobile partly due to Japanese major earthquake. Baoshan Iron and Steel of China expects the profitability keeps low through the year due to higher raw materials cost and low level steel price. The steel makers would try to improve the profitability by consolidation and raw material interest acquisition while they cannot pass the higher raw materials cost on the steel price.

POSCO of South Korea reported 36.1% lower operating profit and 20.6% lower net profit in January-March from same period of 2010. Baosteel posted 21% lower net profit and Anshan Iron and Steel of China posted 95% lower net profit. Other Asian major steel makers including Steel Authority of India (SAIL) and China Steel of Taiwan reported lower profit. Nippon Steel and JFE Steel posted net loss due to more than 20 billion yen of onetime loss from the quake and they posted lower steel units’ recurring profit from October-December. Hyundai Steel of South Korea posted 9.6% higher net profit than same period of 2010 when the firm expanded the sales with higher capacity.

Asian steel makers posted higher sales and profit for 2010 thanks to the market growth. Their sales increased in January-March with higher sales volume and price. However, their margin is getting narrower due to much higher raw materials cost.

Japanese raw steel output will decrease by 2.8% in April-June from January-March due to the quake impact. The quake impact spreads to offshore market. Baosteel plans 3% higher raw steel output in 2011 from 2010 compared with 17% growth in 2010 when the firm expects Chinese automotive steel demand would decrease. Chinese steel demand decreases in some applications when the government tries to cool the overheated economy for sustainable growth.

China is the key for Asian steel market in 2011 while the major issue was South Korean capacity expansion in 2010. Chinese raw steel output was historical high in January-April while the supply is more than the demand and the steel price is weak. Baosteel left the domestic selling unchanged for June while POSCO and China Steel increased the export price. Chinese steel makers are still cautious for price increase.

A source in Japanese trading firm said Chinese makers would increase the steel selling price when 22 makers of 77 members of China Iron & Steel Association posted loss. Chinese makers production and pricing would impact on other Asian steel makers and related industries.