Australian steel producers BlueScope, on Monday, issued a future earnings forecast citing the impact of the Covid-19 (coronavirus) outbreak on its China operations, as a major reason for its forecast of H2 FY20 (Jan-Jun 2020) profits being affected.
BlueScope flagged the impact of supply chain disruption due to the lockdown of several Chinese cities, and an overall uncertainty among Asian businesses, as having a negative effect on steel spreads in the near term.
For its H1 FY2020 (Jul-Dec 2019) results, BlueScope reported its net profit after tax lower by 70pc at $185.8mn, down from $624.3mn in the first half period of the prior financial year.
United states
In the US, total steel despatches were at 1.029mn mt in H1 FY2020, down from 1.074mn mt in H2 FY2019. The benchmark spreads contracted markedly in H1 FY2020 on significantly lower Midwest HRC prices partly offset by lower raw material costs.
In H1 FY20, demand remained stable across key end-use segments, and sales volume remained lower due to seasonality issues.
Benchmark spreads contracted markedly in H1 FY2020 on significantly lower Midwest HRC prices, partly offset by lower raw material costs.
Australia
In Australia, total steel despatches ex-mill were 1.079mn mt in H1 FY2020, up from 1.004mn mt in H2 2019. Painted steel volumes improved 8pc.
Asia
In China, steel despatches during H1 FY2020 were at 0.254mn mt up, from 0.179mn mt in H2 FY2019.
Total steel despatches to India were at 54,700mt in H1 FY2020, down from 65,900mt in H2 FY2019.
Low steel prices coupled with higher raw material costs were cited for the profit drop.
BlueScope’s partner in India, Tata Steel, acquired Bhushan Steel, a firm that produces coated and painted steel products.
Outlook
The company has now forecast its H2 FY2020 earnings before interest and tax to be much like H1, at about $302.4mn. For the forecast, the company has averaged out East Asian HRC prices at $465/mt.
The company’s North Star expansion project in the US is on track, with a new plant to be commissioned in 2022. The steelmaker continues to operate at 100pc capacity utilisation at the North Star plant.
The company is focused on a shift to EAF production and downstream growth in coated capacity, with production to remain high.