TOKYO, Jan 31 (Reuters) - JFE Holdings Inc, Japan’s second largest steelmaker, will increase crude steel output by 1 million tonnes in the next business year after its third-quarter recurring profit jumped nearly three-fold on strong domestic demand.
Sales of construction and automotive steel has picked up in Japan, helped by Prime Minister Shinzo Abe’s push to end two decades of economic stagnation with a mix of fiscal expansion and monetary easing.
JFE’s recurring profit, which is pretax and before one-off items, rose to 50.33 billion yen ($490 million) in the Oct-Dec quarter, from 18.78 billion yen in the same year-ago period, the company said on Friday.
Its annual crude steel output to the year ending March 31 is set to rise by about 4 percent year-on-year to around 29 million tonnes, the highest level in six years.
JFE said it would increase its output further in the 2014/15 financial year.
“Domestic demand is rising. We aim to produce 30 million tonnes in crude steel next business year,” JFE executive vice president Shinichi Okada told a news conference.
“Construction and infrastructure demand will remain solid. A sales tax hike may hurt automobile sales, but demand from shipbuilders are recovering,” he said.
Japan’s overall crude steel output for the Oct-Dec quarter rose 8.6 percent from a year earlier to 28.14 million tonnes, driven by strong construction demand on the back of higher government spending and a rush to build homes ahead of a sales tax hike in April this year.
JFE, which exports about half of its steel products overseas, remains cautious on exports due to a supply glut brought on by China’s massive crude steel output and weak global demand. Weaker international steel prices have weighed on the earnings of Asian steelmakers like South Korea’s POSCO .
“Oversupply in Asia will likely continue. Since market is not expected to improve much, we won’t boost our export,” Okada said.
JFE, the world’s ninth-biggest crude steel producer by volume, kept its forecast of 170 billion yen in recurring profit for the year to March 2014. The figure is lower than the 194.85 billion yen average of 16 analyst estimates, according to Thomson Reuters Starmine.
Strong domestic demand also helped Japan’s top steelmaker, Nippon Steel & Sumitomo Metal Corp, report a nearly nine-fold jump in recurring profit for the Oct-Dec quarter. ($1 = 102.7150 Japanese yen) (Editing by Miral Fahmy)