Nippon Steel Cuts Capex Spending, Forecast As US-China Trade War Hurts Demand

Nippon Steel Corp has downsized its planned capex for the period between 2019-2021 to the extent of 10-20 percent following weak steel demand in the backdrop of continued China-US trade war which has impacted profits.

Japan’s top steelmaker has reported a 33 percent decline in profit for June quarter and predicted a 56 percent plunge in profit for FY20.

The company sees a gloomy scenario has highlighted in its presentations and interaction with investors.

“While promoting further recovery of manufacturing capability, we intend to make a shift to “profitability oriented production” that put more emphasis on economic rationality in production volume in line with order intake, in accordance with demand slowdown in some of domestic industrial sectors & margin deterioration in exports for spot markets,” the company said.

“Margin Shrink brought by high raw material prices and low steel product prices,”

“Iron ore prices remained at high level due to growing pig iron production in China. The impacts from Vale’s accident & RioTinto’s underproduction will be subdued and speculative transactions will recede, but in terms of the current low level of inventory, iron ore prices remain high for now,”

Robust infrastructure investments have boosted demand in long steel products and resulted in the record-high crude steel production. The EAF’s production volume has grew as it substitutes the removed illegal induction furnaces production.

Due to the poor scrap supply chain in China, the demand of pig iron for the EAFs has increased and pig iron production also reached the record-high level.

Iron ore inventory remains low. The long products’ SD situation stays firm, while flat products market bear a weak tone. The polarization between long & flat prices is anticipated to expand as infrastructure investments gain more momentum.

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