TOKYO (Reuters) - Japan’s top steelmaker Nippon Steel & Sumitomo Metal Corp is bracing for a weaker steel market in Asia because the escalating Sino-U.S. trade war may crimp steel demand in top buyer China and in Southeast Asia, a senior executive said.
“The biggest uncertainty is how steel demand and the market in China and Southeast Asia will change,” Nippon Steel Executive Vice President Katsuhiro Miyamoto told Reuters in an interview last week.
“We expect steel prices in Asia to weaken in the second half (October to March) from the first half (April to September) , though Japanese market will likely stay solid on strong demand,” he said, referring the financial year that starts in April.
The world’s third-biggest steelmaker by crude steel output booked a 43 percent rise in net profit for the six months ending in September as its profit margins rose by 3,200 yen ($28.44) per tonne on higher product prices.
But the company assumes the margin improvement will drop to 2,000 yen for the year as steel prices in the rest of Asia are expected to drop in the six months between October and March versus the earlier six-month period, Miyamoto said.
Chinese futures prices for steel rebar used in construction have slipped 4 percent since the end of September to their lowest since July amid increasing uncertainties about global trade and concerns of slowing demand in China.
“The U.S.-China trade friction has had limited impact so far on the global steel market due to healthy demand in China and other areas, but if the Chinese economy weakens and China boosts steel exports to Southeast Asia, it will certainly have an impact,” he said.
Japanese steelmakers are enjoying solid domestic demand from automakers and machinery manufacturers as well as the construction sector, which is busy with projects for the 2020 Tokyo Olympics.
But natural disasters and glitches at their ageing facilities have prevented them from producing as much steel as they had planned.
Nippon Steel trimmed its annual crude steel output forecast to 42.1 million tonnes this month from its August prediction of 43.3 million tonnes, blaming heavy rains and system troubles.
Miyamoto pointed to a combination of factors behind the glitches including generational turnover among the company’s engineers and the higher load on its facilities to make advanced products.
“We have created a team of experts who goes around our factories and gives technical guidance,” Miyamoto said, adding an integrated facility management system, completed in April, should also help it improve systematic maintenance.
The steelmaker aims to produce 11 million tonnes in crude steel each quarter in the next business year and is sticking to its target of annual output of 45 million tonnes in the year to March 2021, Miyamoto said.
Reporting by Yuka Obayashi and Yoshiyasu Shida; Editing by Christian Schmollinger