Japan: JFE Steel posts 6% y-o-y drop in crude steel production in Q1FY'23

JFE Steel - Japan's second largest steel producer - has announced its operational and financial results for the first quarter of fiscal year 2023 (FY23 - 1 April 2023-30 June 2023) on 3 August, 2023.

• Crude steel output: Standalone crude steel output fell by 6% y-o-y to 6.05 million tonnes (mnt) in Q1FY23 as against 6.43 mnt in Q1FY22. However, the same inched up by 1% q-o-q to 5.97 mnt in Q4FY22. Consolidated crude steel production also marginally up by 1% y-o-y to 6.38 mnt as compared with 6.29 mnt in Q4FY22.
  
  
• Steel product shipments: Standalone steel product shipments declined by 6% y-o-y to 5.23 mnt compared to 5.54 mnt in Q1FY22. Moreover, the same was recorded at 5.64 mnt in Q4FY22, down 7% q-o-q.
  
  
• Exports share in Q1FY23 was 44.2% of the total steel shipments. In Q4FY22, the share was 43.6%.
  
  

Financial results

• Profit declined significantly by 38% y-o-y to JPY 84.8 billion ($0.59 billion) in Q1FY23 as against JPY 116.6 billion ($0.82 billion) in the same quarter a year ago.
  
  
• Revenue inched up by 1% y-o-y to JPY 1,262 billion ($8.84 billion) in the quarter against JPY 1,253 ($8.78 billion) same period previous year.
  
  
• Segment profit amounted to JPY 79.8 billion ($0.56 billion), down 30% y-o-y.
  
  
• Segment profit in the steel business was JPY 68.1 billion ($0.47 billion), a fall of 27% y-o-y.
  
  

Market overview

• Strong automotive demand: Companies have an order backlog and are highly motivated to produce semiconductor, supply risks are gradually improving, and production levels are expected to recover slightly.
  
  
• Shipbuilding activity remains stable: Despite the impact of rising material prices and labour shortages, the company has secured a two-year order backlog, which is the standard for stable capacity utilisation. Current levels are expected to remain stable over the next two to three years.
  
  
• Other manufacturing demand: Demand for construction equipment remains strong due to high commodity prices, despite the impact of a slowdown in housing construction in the US. However, the industrial machinery sector should be watched closely as it is increasingly reluctant to invest due to rising interest rates and other economic uncertainties.
  
  
• Demand for new housing slow: Due to rising material prices and labour shortages, the number of new housing starts is stagnating, and the number of small and medium-sized projects remains at a low level.
  
  
• Civil engineering to be affected: Although household measures remain at a high level, they are expected to be affected by rising material prices and labour shortages.
  
  

Outlook:

• The company plans to shut down its upstream facilities and hot rolling mills in Keihin by September 16, 2023.
  
  
• The steel major has signed a joint venture agreement to establish a joint venture company in India to produce GO (grain oriented) electrical sheets with JSW.
  
  
• The company has set its crude steel production target for FY23 at 24.60 mnt, down 0.40 mnt from its previous forecast.