Godo Steel Seeks Better Profit by Price Hike, Cost Cut

Godo Steel’s president Katsutoshi Kurikawa said the firm tries to improve the profitability through price hike and additional cost cutting effort when ferrous scrap cost surges since October 2010. The firm tries to pass the higher cost on the selling price and reduces the cost through across the board efforts to improve the profitability. The firm also tries to expand the export sales to follow growing demand in emerging countries.

Mr. Kurikawa said the sales volume increased by around 30% to 536,000 tonnes in April-September 2010 from same period of 2009 thanks to higher structural steel production at Himeaji while the consolidated recurring profit was near 70% lower at around 500 million yen due to higher scrap cost despite of around 2,300 yen higher selling price. He expects the sales volume and selling price in the second half year to March 2011 is in line with the first half but the higher scrap cost squeezes the profitability.

Mr. Kurikawa expects Japanese concrete reinforcing steel bar demand in fiscal 2010 ending March 2011 could increase from around 7.2 million tonnes of original outlook in the industry. He expects the demand could increase marginally in fiscal 2011.

Mr. Kurikawa said Japanese steel industry should promote globalization in 2 aspects including offshore marketing with international competitiveness and lower cost structure to compete with cheaper import. He warns Chinese long products export could increase significantly when Chinese oversupply could increase.

Mr. Kurikawa said Godo Steel tries to improve cost structure through better productivity and better yield and quality control while the firm tries to expand higher grade wire rod production. He said the firm started central control system of scrap purchasing in 2009 and the firm tries to reduce the scrap purchase cost more through new actions including joint purchase with other plants around Tokyo, Osaka and Niigata.

The firm exported 74,000 tonnes of billet and 32,000 tonnes of steel products in the first half of fiscal 2010. Mr. Kurikawa sees the export condition is improving recently while the extremely higher yen rate reduced the competitiveness in late 2010. He said the firm tries to expand the export sales depending on yen rate, US dollar based price and scrap cost.