Japan: JFE Steel reports 9% y-o-y drop in crude steel production in Q1FY'24

JFE Steel, Japan's second largest steel producer, has announced its operational and financial results for the first quarter of fiscal year 2023 (Q1'FY25) on 5 August, 2024.

Crude steel output: Standalone crude steel output dropped by 9% y-o-y in Q1FY'24 to 5.48 million tonnes (mnt) as against 6.05 mnt in Q1FY'23. Moreover, on q-o-q basis the same inched down by 3% q-o-q compared to 5.67 mnt in Q4FY'23.

Consolidated crude steel production decreased by 9% y-o-y to 5.8 mnt in Q1FY'24 as of 6.38 mnt in Q1FY'23. Furthermore, the same edged down by 3% q-o-q against 6.01 mnt in Q4FY'23.

Steel product shipments: Standalone steel product shipments declined by 10% y-o-y to 4.7 mnt in Q1FY'24 compared to 5.23 mnt in Q1FY'23. Moreover, the same went down by 7% q-o-q against 5.04 mnt in Q4FY'23.

Exports share in Q1FY'24 was 40.6% of the total steel shipments. In Q4FY'23, the share was 41.3%.

Financial results

• Profit declined significantly by 33% y-o-y to JPY 56.9 billion ($0.4 billion) in Q1FY'24 as against JPY 84.8 billion ($0.59 billion) in the same quarter a year ago.
  
  
• Revenue fell by 4% y-o-y to JPY 1,211.1 billion ($6 billion) in the quarter against JPY 1,262 ($9 billion) in the same period of the previous year.
  
  
• Segment profit amounted to JPY 51.7 billion ($0.36 billion), down 35% y-o-y.
  
  
• Segment profit in the steel business was JPY 31.5 billion ($0.22 billion), a sharp fall of 54% y-o-y.
  
  

Market overview

Automotive demand: Production motivation remains strong, driven by consistent demand, despite challenges posed by newly surfaced certification issues and other external factors. Close monitoring of production developments is essential to address these challenges effectively.

Shipbuilding activity: Despite facing challenges such as elevated material costs and labour deficiencies, each shipbuilder has managed to secure a steady stream of orders extending three years into the future. This robust order book is anticipated to persist for the next two to three years.

Other manufacturing demand: The construction equipment market is facing a softening trend in Europe and Asia, while North America appears to be nearing a peak. Industrial machinery, on the other hand, remains sluggish due to economic uncertainties caused by rising interest rates and persistent inflation. Although there are some indications of a potential market bottom, a significant recovery is yet to be observed.

Non-housing sector: Demand for large-scale projects in the non-housing sector, previously robust, has been delayed due to escalating material costs and labour shortages. The broader construction sector is experiencing sluggish demand as rising construction expenses and interest rates negatively impact both investment in construction and consumer confidence in housing acquisition.

Civil engineering to be affected: Despite ongoing high-level budget measures, their effectiveness is anticipated to be hindered by escalating material costs and labour deficiencies.

Outlook

Standalone crude steel production is projected to reach approximately 23 million tonnes (mnt) annually due to a decline in automobile demand both domestically in Japan and internationally during the first half of the year. While an uptick in demand is anticipated for the second half, it is insufficient to offset the production losses incurred earlier in the year.