Japan’s Nippon Steel expects domestic steel demand to bottom out to 24mn mt in H1 (April to September) and reach 50mn mt for the full year, which is 9pc lower than FY2019-20. Overall demand for steel products in H2 is expected to be lower than pre-pandemic levels at 26mn mt.
The recovery in the manufacturing industry is expected to generate demand of 15mn mt in H1 and 17mn mt in H2, resulting in a combined annual demand of approximately 32mn mt for the full year, which is 7pc lower than FY2019-20.
Nippon Steel forecasts a consolidated business loss of JPY150bn ($1.41bn) for H1 due to a slump in production volumes, expected to be offset by cost reductions through low operation rate. The company has planned an additional cost reduction of more than JPY50bn in variable cost and JPY200bn in fixed cost to improve its balance sheet. For the full year, Nippon Steel expects a consolidated business loss of JPY120bn.
Production
In Q1, Nippon’s crude steel production on a non-consolidated basis fell by 34pc to 7.2mn mt from the prior year quarter. On a consolidated basis, the company produced 8.30mn mt of crude steel, down by 33pc from the prior year quarter.
Production is expected to rise in Q2 to approximately, 14.90mn mt in H1 and 16.9mn mt in H2. Nippon Steel expects the operation rate of 60-70pc in H1 and 80pc in H2.
Nippon’s steel product shipment in Q1 declined by 27pc to 7.12mn mt from the prior year quarter. Exports were 39pc of total steel product shipment in Q1 compared to 38pc in the prior year quarter.
Streamlined production
Nippon Steel has implemented production reduction in its upstream facilities by reducing blast furnace (BF) productivity and extension of blowing-stop times. The banking process is in progress at six BFs out of the total 15, and related coke ovens’ operation suspensions are also in progress.
Operations at downstream facilities have been optimised in line with the reduction in upstream activities at each steelworks based on market demand. The company is also converting idling times into temporary suspensions.
Nippon Steel is also recalibrating its capex. The company has decided to reduce its capex by an additional JPY100bn in FY2020. Total capex for the 2018-2020 period will be JPY300bn.
($1 = JPY106.13)