JPN 14 Major Electric Furnaces Gain Higher Profit in F2008

Japanese 14 major electric furnace steel makers gained year-on-year higher recurring profit for fiscal 2008 ended in March 2009 while Topy Industries and Yamato Kogyo posted year-on-year lower recurring profit and Toyohira Steel posted recurring loss. Most makers gained profits from the wide price gap between steel products and ferrous scrap. Return on Sales (ROS) improved by 3.3 points to 11.7% in fiscal 2008 from fiscal 2007 for 16 electric furnaces except for Toyohira Steel.

Electric furnaces’ ferrous scrap purchasing price was averagely 40,000-50,000 yen per tonne in fiscal 2008, up by more than 10% from fiscal 2007. The averaged purchasing price was 50,310 yen per tonne at Godo Steel, 47,000 yen at Yamato Kogyo, 46,800 yen at JFE Bars & Shapes, 46,000 yen at Tokyo Steel Manufacturing and 44,000 yen at Kyoei Steel.

Meanwhile, electric furnaces’ selling price of steel products was averagely around 100,000 yen per tonne in fiscal 2008, up by more than 30% from fiscal 2007. The averaged selling price was 103,000 yen per tonne at Tokyo Steel Manufacturing, 99,000 yen at Yamato Kogyo, 98,800 yen at JFE Bars & Shapes, 96,519 yen at Godo Steel and 89,000 yen at Kyoei Steel. Electric furnaces owed their profit growth to the price gap between materials and products.

The 17 electric furnaces forecast their revenues and profits decline widely in fiscal 2009 due to drop down of steel product sales and prices. Most makers estimate the averaged product selling price at around 60,000-70,000 yen per tonne and ferrous scrap purchasing price at around 20,000-30,000 yen per tonne for fiscal 2009. They expect to gain margins from the price gap. However, some makers may post losses unless the demand volume recovers to the breakeven point.