Japan: JFE Steel posts 3% y-o-y rise in crude steel production in Q3FY'23

JFE Steel - Japan's second largest steel producer - has announced its operational and financial results for the third quarter and nine months of fiscal year 2023 (1 April 2023-31 December 2023) on 6 February, 2024.

Crude steel output: Standalone crude steel production edged up by 3% y-o-y to 5.62 million tonnes (mnt) in Q3FY23 as against 5.48 mnt in Q3FY22. However, the same fell by 8% q-o-q against 6.11 mnt in Q2FY23. Consolidated crude steel production also declined by 8% q-o-q to 5.95 mnt as compared with 6.47 mnt in the previous quarter of FY23.

Steel product shipments: Standalone steel product shipments edged down by 3% y-o-y to 5.08 mnt compared to 5.25 mnt in Q2FY22. Moreover, the same went down by 6% q-o-q against 5.42 mnt in Q2FY23.

Revenue went down by 7% y-o-y to JPY 915.6 billion ($6.17 billion) in the quarter against JPY 986.9 ($6.65 billion) in the same period previous year. However, on a q-o-q basis, it fell by 3% against JPY 948.6 billion ($6.40 billion) in the previous quarter.

Segment profit in the steel business hiked by 121% y-o-y to JPY 48.2 billion ($0.32 billion). Moreover, it fell by 12% q-o-q against JPY 54.7 billion ($0.37 billion) in the previous quarter.

Market overview

• Automotive industry to clear order backlog: Despite existing order backlogs and strong production motivation across companies, the semiconductor supply chain is showing signs of gradual improvement. This suggests a moderate recovery in production levels, potentially easing the current constraints.
  
  
• Shipbuilder secures backlog despite market challenges: While rising material costs and limited workforce pose challenges, the company has successfully built a two-year order backlog, ensuring a steady stream of work. This strong position is expected to hold firm for the next 2-3 years, providing stability and growth potential.
  
  
• Other manufacturing demand: While mining machinery sees steady demand due to high resource prices, construction and civil engineering segments experienced a decline in external demand, requiring close monitoring. Meanwhile, industrial machinery warrants careful attention as rising interest rates and economic uncertainties make companies increasingly cautious about investment.
  
  
• Non-housing projects facing delay: While previously robust, large-scale non-housing projects are facing delays due to skyrocketing material costs and worker scarcity. This slowdown extends to the housing market, where new housing starts have stalled and smaller projects remain sluggish.
  
  
• Civil engineering to be affected: While the budget plan is being actively put into action, spiking material prices and difficulty finding workers could throw a wrench in the works.
  
  

Outlook:

FY2023 steel business segment profit is expected to reach 205.0 billion yen, despite excluding inventory valuation. SW Steel is ramping up its crude steel production capacity, expanding from 28 million tonnes to 37 million tonnes by March 2025.