Nippon Steel first half profit up on low iron ore costs

Nippon Steel & Sumitomo Metal Corp, Japan's biggest steelmaker, said on October 30 its first-half recurring profit rose 1.5 percent as lower material costs boosted margins and offset appraisal losses on its high-priced stockpiles. The world's No.2 steelmaker by output stuck to its full-year forecast of 400 billion yen ($3.67 billion) in recurring profit, which is pre-tax before one-off items, compared with the 403.77 billion yen mean estimate of 16 analysts polled by Thomson Reuters I/B/E/S.
"The first-half profit came above our initial estimate. But we are keeping our full-year forecast as accidents at the Nagoya plant will reduce an annual profit by 24 billion yen," Executive Vice President Katsuhiko Ota told a news conference.
The Nagoya plant in central Japan, which was built in 1958 and produces about 15 percent of the company's total steel output, suffered a fire in early September, following a series of power failures and smoke releases earlier this year.
The global steel industry has been struggling with over-capacity and sluggish demand in China, the world's biggest producer and consumer of steel, as economic growth there slows.
But Japanese steelmakers have managed to eke out a profit, aided by falling iron ore prices and sound domestic steel demand.
China's woes have led to iron ore prices dropping to five-year lows this year as supplies of the primary steel-making material build up.
"A pullback in domestic demand after a national sales tax hike in April is slowly subsiding. Steel demand for warehouses, hospitals and schools remains strong, while demand from shipbuilders is also solid," Ota said.
"We expect to maintain our first-half margins in the second half of this business year."
Nippon Steel said its recurring profit for the April-September period totalled 176.32 billion yen ($1.62 billion), against 173.69 billion yen in the same period a year earlier. The Tokyo-based company plans to produce 46.10 million tonnes of crude steel on a parent-company basis in the year to March 31, compared with 45.67 million tonnes a year earlier.
Its planned steel output for fiscal 2014 marks the highest since fiscal 2007, before the Lehman shock, when its output was 46.73 million tonnes. Rival JFE Holdings Inc said earlier this week that its unit JFE Steel plans annual crude steel output of 29.2 million tonnes this year, up from 28.67 million tonnes in the prior year and the highest since fiscal 2007.