Nippon Steel, JFE may cut outlooks as costs bite

TOKYO Jan 28 (Reuters) - Nippon Steel Corp (5401.T) and JFE Holdings Inc (5411.T), the world's No.4 and No.5 steelmakers, may cut their full-year profit forecasts on Friday after floods in Australia forced them to buy costlier coal.

Steelmakers are scrambling to secure supplies of coal after the floods caused by monsoon rains late last year struck Queensland, the heart of Australia's coal mining sector.

Japan's two largest steelmakers are still struggling to lift selling prices enough to account for last year's jump in raw materials prices, and are now faced with the prospect of even higher prices due to tight supplies.

Analysts generally expect Nippon Steel and JFE to report weaker profits for the October-December quarter and to cut their outlooks for the full year to March, even with the support of Asia's rising export markets, which contribute nearly half of their sales.

Nippon Steel will unveil its results at 0430 GMT on Friday, followed by JFE at 0500.

Nippon Steel is forecasting its recurring profit to come to 250 billion yen ($3.04 billion) for the year to March, a jump from 11.83 billion yen profit a year earlier. JFE sees a profit of 220 billion yen, up from 69.29 billion yen a year ago.

Earlier this month the Nikkei newspaper said Nippon Steel would likely fall short with a recurring profit of 220 billion yen, and predicted a full-year profit for JFE of 200 billion yen.

The Thomson Reuters I/B/E/S consensus estimates -- at 252.4 billion yen for Nippon Steel and 223.7 billion yen for JFE -- are still roughly in line with the companies' forecasts.

But many analysts say they are waiting for the October-December results before changing their full year forecasts, and that downward revisions are likely.

Nippon Steel and JFE will likely face an even tougher time in April-June, when the cost of iron ore and coal is set to jump by more than 20 percent, offsetting the positive impact of strong demand and the potential for steel price hikes in Asia.

Spot coking coal prices have shot up to more than $350 per tonne and consultants Wood Mackenzie reckon spot prices could reach $500. [ID:nLDE70G0S6], while iron ore prices are rising towards the record $200 a tonne hit in February 2008. (Reporting by Yuko Inoue; Editing by Nathan Layne and Elaine Hardcastle)