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Segment profit in 1H of FY2019 was 17.7billion yen, decreased by 8.3 billion, compared to the previous forecast.

Cost : -5.0billion yen

Maintenance cost increased due to the impacts of typhoons and small operating issues.

Sales Volume and Mix : -9.0billion yen

Decrease of steel demand and the drop in price in the overseas market caused the production adjustment, which decreased both the volume of crude steel production and shipment.

Crude steel (Standalone) -0.21Mt（14.00⇒13.79Mt） Shipment (Standalone)－0.40Mt（12.20⇒11.80Mt）

Sales Prices and Raw materials (Metal spread):+4.0 billion yen（+300 yen/t-shipment）

Metal spread increased through price fall in coking coal.

Inventory valuation etc.: +3.0 billion yen

◆Others : -1.3billion yen

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Segment profit in 1H of FY2019 was 17.7 billion yen, decreased by 99.6 billion year-on-year.

Cost : ＋13.0 billion yen

Sales Volume and Mix : -7.0billion yen

Decrease of steel demand and the drop of price in overseas market caused the production adjustment, which decreased both crude steel production and shipment decreased year-on-year.

Crude steel (Standalone) -0.26Mt（14.04⇒13.79Mt） Shipment (Standalone)－0.26Mt（12.06⇒11.80Mt）

Sales Prices and Raw materials (Metal spread):-51.0billion yen（-4,300yen/t-shipment）

Metal spread decreased through fall in steel price in overseas market and increase in raw material (mainly iron ore) price.

Inventory valuation etc.: -20.0billion yen

◆Others : -34.6billion yen

・Increase in depreciation cost with strengthening manufacturing capabilities ・Increase in sub materials, logistics, and outsourcing costs

・Decrease in profit of subsidiary companies etc.

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Combined inventories of HR, CR and Coated Steel as of the end of September 2019 were 4,435K tons.

From August 2019

: 132K tons decrease

From September 2018: 39K tons increase

A certain amount of imported steel maintains the inventory level higher.

The demand-supply state needs to be watched cautiously due to decreasing domestic steel demand. Production needs to be adjusted flexibly to meet the ongoing demand.

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[Inventories of Plate (Plate Shear)

Inventories of plate shear as of the end of September 2019 was 449K tons. From August 2019 : 5K tons decrease

From September 2018: 73K tons increase

Although the inventory had been increasing under the weak demand until the end of this August, the inventory at the end of September 2019 decreased slightly from the previous month.

[Inventories of Wide Flange Shapes]

Inventories of wide flange shapes as of the end of September 2019 was 191Ktons. From August 2019 : 7K tons decrease

From September 2018: 7K tons decrease

Due to the increase in the volume of shipping and appropriate stocking enough to meet the demand, the amount of the inventory at the end of this September decreased. The decreasing of the inventory has continued for 4 months.

The inventory ratio also dropped to slightly over the 2-month level.

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The volume of imported ordinary steel in September 2019 was 355K tons.

From August 2019: 17K tons decrease

From September 2018: 55K tons increase

A certain amount of steel has been imported continuously.

Steel products from China and Korea seem to be flowing into the Japanese market because of the decrease of the Asian market price.

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Crude steel production in September 2019 in China was 82.8M tons (2.8M tons on daily basis: slightly decreased compared to the previous month. However, it still remains high.).

From August 2019: 1.6M tons decrease

From September 2018: 7.3M tons increase

Export of steel from China in September 2019 was 5.3M tons. From August 2019: 0.3M tons increase

From September 2018: 0.6M tons decrease

Although the volume of steel export still remains low, crude steel production remains high. Additionally, the price of main raw materials and the domestic steel market price in China are falling down. Therefore, whether the Chinese mills might increase the volume of exports should be watched cautiously.

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Inventories in China as of the end of October 2019 was approximately 9.4M tons. From September 2019: 13.4% decrease

From October 2018: 4.3% decrease

After Chinese New Year, the volume of inventories decreased as the seasonal pattern, and it remained high for a while. However, currently, it tends to decrease again.

The amount of exports from China still remains low, from which demand-supply is well-balanced under the stable domestic demand at this point.

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Metal spread, calculated based on Chinese spot market price of HRC and international spot market prices of iron ore and hard coking coal, dropped below $150/t in this June and July due to the decrease of the HRC price and the rise of the iron ore price.

Afterwards, metal spread increased to $180/t due to decrease of the raw material price, and it remains the same level. The signs of recovery of the market price are not observed yet.

It is necessary to watch cautiously how much metal spread will recover in a coming demand season and environmental regulating season in winter.

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Segment profit forecast for FY2019 is 0 billion yen, decreasing by 70.0 billion yen from the previous forecast. Cost reduction: -10.0billion yen

Maintenance cost increased due to the impacts of the typhoons and small operating issues.

Sales Volume and Mix : -30.0billion yen

  • Decrease in production volume and product mix deterioration are estimated due to decrease in domestic and overseas steel demand as well as decrease in steel price in the overseas market.
  • Crude steel (Standalone) -1.00Mt（28.00⇒27.00Mt）

Sales Prices and Raw materials (Metal spread):-3.0billion yen（-100yen/t-shipment） ・Mainly, the decrease in steel price in overseas market shrank metal spread.

Inventory valuation etc.: -30.0billion yen

◆Others : +3.0 billion yen

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Segment profit forecast for FY2019 is 0 billion yen, decreasing by 161.3 billion yen year on year. Cost : ＋50.0 billion yen

Cost reduction : +28.0 billion yen: Cost effects of investment in West japan works etc.

One-off effect in FY2018 : +22.0 billion yen

Sales Volume and Mix : ±0 billion yen

While the volume of crude steel production is estimated to increase due to the recovery from the operating issues last year, the product mix is estimated to deteriorate as well.

Crude steel (Standalone) ＋0.69Mt（26.31⇒27.00Mt）

Sales Prices and Raw materials (Metal spread):-96.0billion yen（-4,100yen/t-shipment ）

Metal spread is expected to shrink with price down of steel in the overseas market due to escalating trade friction between the US and China.

  • Inventory valuation etc.: -62.0 billion yen
  • Sub materials cost etc. : -15.0 billion yen

・Sub materials : -5.0billion yen

・Logistics : -4.0billion yen

・Outsourcing : -5.0billion yen

◆Others : -38.3billion yen

・Decrease in profit of subsidiary companies

・Increase in depreciation cost with strengthening manufacturing capabilities ・Increase in loss of disposal of asset etc.

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Segment profit forecast for 2H of FY2019 is -17.7 billion yen, decreasing by 35.4 billion yen from 1H of FY2019.

  • Cost : +14.0 billion yen

Cost effects of investment in West japan works etc.

Sales Volume and Mix : -10.0billion yen

  • Crude steel production is estimated to decrease with the fall of both domestic and overseas steel demand.
  • Crude steel (Standalone) -0.57Mt（13.79⇒13.21Mt）

Sales Prices and Raw materials (Metal spread):-14.0billion yen（-1,200yen/t-shipment）

Metal spread is expected to shrink due to the decrease of the market price mainly in the overseas market along with the escalating trade friction between the US and China.

Inventory valuation etc.: -17.0billion yen

◆Others : -8.4billion yen

・Increase in depreciation cost with strengthening manufacturing capabilities

etc.

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Segment profit result for 1H of FY2019 was 17.7 billion yen, decreasing 26.3 billion yen compared to that for 2H of FY2018.

  • Cost : +23.0 billion yen

Sales Volume and Mix : +17.0 billion yen

Recovery of the crude steel production from the operating issues in FY2018

Crude steel (Standalone) +1.52Mt（12.27⇒13.79Mt）

Shipment（Standalone ）+0.08Mt（11.72⇒11.80Mt）

Sales Prices and Raw materials (Metal spread):-31.0billion yen（-2,600yen/t-shipment）

Metal spread was shrunk due to the decrease in steel price in overseas market and increase in iron ore price.

Inventory valuation etc.: -25.0billion yen

◆Others : -10.3billion yen

Mainly, decrease in profit of subsidiary companies

etc.

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Segment profit for 2Q of FY2019 was 3.2 billion yen, decreasing 11.3 billion yen from 1Q in FY2019.

  • Cost : -3.0 billion yen

Sales Volume and Mix : -7.0billion yen

The volume of crude steel production went down due to the production adjustment along with the decrease in steel demand and decline of the price in the overseas market.

Crude steel (Standalone) -0.22Mt（7.00⇒6.79Mt） Shipment（Standalone）+0.09Mt（5.85⇒5.95Mt）

Sales Prices and Raw materials (Metal spread):-0.7billion yen（-1,200yen/t-shipment）

Metal spread decreased mainly through increase in iron ore price and decrease of the steel price in overseas market.

Inventory valuation etc.: +12.0 billion yen

◆Others : -6.3billion yen

・Decrease in dividends received

・Increase in depreciation cost

etc.

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JFE Holdings Inc. published this content on 12 November 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 November 2019 08:49:09 UTC