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Nippon Steel, the world's No.2 steelmaker, cut its profit outlook for this year by a bigger-than-expected 35.7 percent as a slump in car sales hits its mainstay autosheet business.
While weaker demand for everything from cars to household appliances has hit earnings at all global steelmakers, Japan's steel mills are finding it tougher still as car makers such as Toyota Motor are its top customers.
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AP A Chinese worker walks near steel bars at a market in Shenyang, northeastern China's Liaoning province Sunday April 15, 2007. China will cut export tax rebates on steel, an industry group announced last week, amid pressure on Beijing to rein in rapid growth in exports.(AP Photo) ** CHINA OUT ** |
Nippon Steel, which ranks behind only ArcelorMittal, now sees a pretax recurring profit of 360 billion yen ($4 billion) for the year to end-March, below an earlier estimate for 560 billion yen, and widely missing a consensus estimate for 512.27 billion yen in a poll of 15 analysts by Reuters Estimates.
October-December pretax recurring profit fell 1.6 percent to 148.19 billion yen, as cost cuts helped ease slowing demand from consumers who took to the sidelines in an economy that fell into recession.
Nippon Steel plans to cut output by a record 4 million tonnes in October-March, equivalent to about a quarter of its first-half output, in response to weak demand for cars and other machinery.
South Korea's POSCO, the world's No.4 steelmaker, warned this month that its 2009 sales could fall by up to 12 percent. It said it could cut steel output by as much as 12 percent in the face of slowing demand.
Japan's leading car makers, Toyota, Honda Motor and Nissan Motor, have all cut production as drivers put off big-ticket buys, leaving dealers' yards full of unsold cars.
Toyota, the biggest single customer of both Nippon Steel and rival JFE Holdings, has forecast a first-ever annual operating loss, prompting speculation it will squeeze the whole supply chain in upcoming price negotiations.
Nippon Steel and its local competitors are expected, in turn, to press suppliers for big cuts in iron ore and coal prices, with the Nikkei business daily predicting demands for a 40 percent cut for iron ore and up to 70 percent for coal, levels that could save steelmakers around $33 billion.
Shares in Nippon Steel dropped 25 percent in October-December, roughly in line with Tokyo's iron and steel subindex, but lagging the benchmark Nikkei's[N225
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] 21 percent fall. POSCO fell 14 percent in the same period.
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