Japan’s JFE Steel forecasts total production to reach 22mn mt in FY2020-21, down 20pc from the prior year, according to the company’s earnings release. In the second half of 2020 (H2), business and economic activities in Japan are expected to recover by 20pc from H1. End-user industries including automotive and shipbuilding could be the major drivers of demand. However, the company anticipates demand for ordinary steel in the whole FY2020 to decline by 20pc from the prior year. The recovery in H2 is expected to be gradual and the overall forecast for H2 remains negative.
High raw materials prices, especially iron ore, resulted in the high production costs while the overall demand in Japan was affected by the COVID-19 pandemic. Reduced economic activities during the national emergency to fight the pandemic resulted in lower sales. In Q1, the company’s sales of finished steel dropped by 21.5pc to 4.59mn mt from the prior year.
Production
In Q1, JFE’s crude steel production dropped by 31.5pc to 4.8mn mt from 7mn mt in the same period the prior year. Production declined as the company decided to adjust outputs to match the low demand situation caused by the pandemic. The company had shut down its blast furnace number 4 at Kurashiki and blast furnace no 4 in Fukuyama towards the end of June.
Financials
JFE’s steel business segment reported a loss of JPY57.8bn ($54.15mn) compared to a profit of JPY14.5bn in the prior year quarter. The business loss from steel portfolio in FY2020-21 is likely to reach JPY145bn compared to a loss of JPY 8.7bn in FY2019-20.JFE group consolidated net loss in Q1 was JPY39.19bn compared to a profit of JPY19.74bn in the prior year quarter. For the full year, JFE expects a loss of JPY100bn amid a weak demand outlook.
($1 = JPY 106.72)