Japan steelmakers see profits hit after quake

Japan’s biggest steelmakers Nippon Steel and JFE Holdings yesterday reported weaker earnings for the fiscal first quarter due to the negative impact of the March disasters on domestic demand.

JFE saw net profit tumble 75 per cent year on year to 7.12 billion yen ($91.4 million) for the quarter.

Nippon Steel, Japan’s largest steel maker by volume, generated a net profit of 29.09 billion yen in the period, 8.4 per cent higher than the same time a year earlier, but the gain was attributed to a lower tax burden.

The recent quarter saw steel demand in Japan weaken as manufacturers such as automakers cut output following the March 11 earthquake and tsunami amid parts and power shortages.

Meanwhile iron ore and coking coal, the two main raw materials for steel production, have seen significant price rises in recent years in a market dominated by the three global mining giants, Anglo-Australian firms BHP Billiton and Rio Tinto, and Brazil’s Vale.

Nippon Steel was downgraded by both Moody’s and Standard & Poor’s in June amid concerns over its profitability in the face of rising commodity prices.

The Tokyo-based company produces high-quality steel for use in a variety of sectors globally, with the auto industry a key customer.

In February Nippon Steel and third-ranked rival Sumitomo Metal Industries said they would work towards a merger that would create the world’s second-largest steel firm by next year.