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MarketScreener Homepage  >  Equities  >  Tokyo Stock Exchange  >  Nippon Steel Corporation    5401   JP3381000003

NIPPON STEEL CORPORATION

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Japan metals manufacturers see pick-up in demand from automakers after first-quarter plunge

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08/17/2020 | 03:49am EDT
FILE PHOTO: An engineer makes an arm rail for residential buildings inside a metal processing factory at an industrial zone in downtown Tokyo

Japanese manufacturers of metals, including steel and aluminium, saw their output plunge in the April-June quarter as automakers temporarily shut factories to curb the spread of the COVID-19 virus and to match slumping demand.

They expect a gradual pick-up in metals used in automobiles and other industries toward next March, but not enough to bring demand back to pre-pandemic levels, suggesting a smaller annual import of raw materials such as iron ore, coking coal and primary aluminium ingots. 

"Demand for steel used in automobiles will recover from the July-September quarter as automakers are stepping up output, but it won't be back to 100% by March," Junichi Akagi, general manager of JFE Steel, Japan's second-biggest steelmaker, said earlier this month.

Crude steel output at the world's No.3 steel producer plunged 31% in the April-June quarter versus a year earlier to 18 million tonnes, according to the Japan Iron and Steed Federation, with orders of ordinal steel from automakers slumping 58% to 920,000 tonnes, the lowest quarterly level since 1971.

(For graphic on Japan crude steel output Japan crude steel output, click: https://graphics.reuters.com/HEALTH-CORONAVIRUS/JAPAN-METALS/oakvembbdvr/chart.png)

The nation's production of aluminium rolled products slid 15% in the quarter, the Japan Aluminium Association said.

(For graphic on Japan output of rolled aluminium products, click: https://graphics.reuters.com/HEALTH-CORONAVIRUS/JAPAN-METALS/rlgvdndrkvo/chart.png)

With the auto segment accounting for about 20% of steelmakers' local demand, and 15-18% for suppliers of rolled aluminium products, a recovery in car production is a key for the suppliers' recuperation from devastated earnings.

"Our steel output in the October-March second half will rise 20% from the April-September half as industry activities, centred in automobiles, are expected to rebound," JFE Holdings President Koji Kakigi said last week.

JFE Steel may restart one of the two blast furnaces which were temporarily suspended to cope with the COVID-19 crisis, in October, Kakigi said.

Nippon Steel President Eiji Hashimoto, also the head of the steel federation, has warned Japan's crude steel output may fall below 80 million tonnes this financial year, the lowest since 1968.

UACJ Corp, Japan's biggest aluminium roller, also forecast a recovery in demand from automakers after June, but cited "uncertainty" over the outlook.

Faced with collapsing demand for finished metals, Japan's import of raw materials dropped sharply in the April-June quarter, with iron ore dipping 21% year-on-year, coking coal sliding 8% and primary aluminium ingots declining 16%, according to trade data.

If a recent resurgence in Japanese coronavirus infections prompts restrictions in industry activities, a further reduction in imports of these materials is likely, industry experts say.

(Reporting by Yuka Obayashi; Editing by Lincoln Feast.)

By Yuka Obayashi


Stocks mentioned in the article
ChangeLast1st jan.
JFE HOLDINGS, INC. 4.06% 794 End-of-day quote.-43.73%
NIPPON STEEL CORPORATION 3.25% 1126.5 End-of-day quote.-31.89%
UACJ CORPORATION 1.63% 1743 End-of-day quote.-30.22%
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Financials
Sales 2021 4 831 B 46 206 M 46 206 M
Net income 2021 -166 586 M -1 593 M -1 593 M
Net Debt 2021 2 253 B 21 552 M 21 552 M
P/E ratio 2021 -6,23x
Yield 2021 0,53%
Capitalization 1 037 B 9 824 M 9 920 M
EV / Sales 2021 0,68x
EV / Sales 2022 0,62x
Nbr of Employees 106 599
Free-Float 90,9%
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Mean consensus OUTPERFORM
Number of Analysts 11
Average target price 1 426,00 JPY
Last Close Price 1 126,50 JPY
Spread / Highest target 63,3%
Spread / Average Target 26,6%
Spread / Lowest Target 0,31%
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Managers
NameTitle
Eiji Hashimoto President & Representative Director
Kosei Shindo Chairman
Shuhei Onoyama Representative Director & Vice President
Shinji Tanimoto Representative Director & Vice President
Akihiko Inoue Director
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