Japan: JFE Steel reports 3% y-o-y decline in crude steel production in FY'23

JFE Steel, Japan's second largest steel producer, has announced its operational and financial results for financial year 2023 (FY'23).

Crude steel production: Standalone crude steel production in FY'23 decreased by 3% y-o-y to 23.45 million tonnes (mnt) against 24.1 mnt in FY'22. However, on q-o-q basis the same slightly went up by 1% q-o-q to 5.67 mnt in fourth quarter of financial year 2023 (Q4FY'23) as compared to 5.62 mnt in Q3FY'23.

Consolidated crude steel production edged down by 3% y-o-y to 24.8 mnt in FY'23 against 25.48 mnt in FY'22. However, on q-o-q basis the same slightly went up by 1% q-o-q to 6.01 mnt in Q4FY'23 as compared to 5.95 mnt in Q3FY'23.

Steel product shipments: Standalone steel product shipments reduced by 4% y-o-y to 20.77 mnt in FY'23 compared to 21.74 mnt in FY'22. Moreover, the same inched down by 1% q-o-q to 5.04 mnt in FY'23.

Revenue fell by 4% y-o-y to JPY 3,716 billion ($24 billion) in FY'23 against JPY 3881.1 billion ($25 billion) in FY'22. However, on q-o-q basis the same edged up by 2% q-o-q to JPY 934.6 ($6 billion) in Q3FY'22 compared to JPY 915.6 billion ($6 billion) in Q3FY'23.

Segment profit in the steel business rose by 38% y-o-y to JPY 202.7 billion ($1 billion) in FY'23 against JPY 146.8 billion ($1 billion) in FY'22. Whereas, the same fell on q-o-q by 34% to JPY 31.7 billion ($0.20 billion) in Q4FY'23 compared to JPY 48.2 billion ($0.30 billion) in the previous quarter.

Market overview

Automotive sector outlook: Activity levels in the automotive sector have remained steady despite various challenges. Moreover, demand for vehicles continues to be strong, and production is expected to make a gradual recovery. However, a full-fledged recovery might be moderate due to stricter loan approval processes in ASEAN countries and a slowdown in China's economic growth.

Shipbuilding: The company is experiencing a positive outlook despite facing headwinds from rising material costs and labour shortages. They have secured a two-year backlog of orders, which is considered the standard for a stable workload. This strong demand is expected to remain consistent over the next two to three years.

Other manufacturing: The construction equipment sector is experiencing mixed signals. While high resource prices are driving demand for mines, weak sales to key markets in Europe and Asia are causes for concern. Industrial machinery manufacturers, on the other hand, are taking a wait-and-see approach due to rising interest rates and inflation, leading to a cautious investment climate. In both sectors, keeping a close eye on future trends will be crucial for navigating these uncertain times.

Civil engineering: Although budget measures continue to be implemented at a high level, it is expected to be affected by rising costs of materials and labour shortages.

Non-housing sector: In the non-housing sector, demand for large-scale projects has seen a shift. Previously, demand was relatively strong. However, recent challenges, including rising material prices and labour shortages, have caused delay in projects.

Outlook: JFE Steel might experience a period of moderate growth or even stagnation in terms of production volume. However, profitability could remain stable or even increase due to potential price hikes and cost controls. The company's performance will depend on navigating the uncertain economic climate and capitalising on opportunities in the automotive and shipbuilding sectors.