JFE Holding says surging coal prices to hit profits
Reuters reported that Japan's second biggest steelmaker JFE Holdings Inc halved its full year profit forecast blaming the recent surge in prices for coking coal.
Mr Shinichi Okada JFE executive vice president told a news conference that "We hadn't expected coking coal prices to climb this much.” He said that "Things may change in a year or so, but given China's effort to tackle overcapacity issue, coking coal prices may stay at high levels at least until March pointing to the company's assumption of coking coal prices at $200 per tonne for the October-March half.”
Spot prices for premium hard coking coal in Australia, which dominates global exports, this week surged to over USD 250 a tonne.
That took the rally so far this year to more than 200 percent, after China moved to cut overcapacity in its mammoth coal sector. Coking coal is used to produce steel. JFE, the world's No.8 steelmaker in 2015, now expects its annual consolidated recurring profit for the current financial year to come in at JPY 30 billion (USD 285 million), down from its previous estimate of JPY 65 billion and an actual profit of JPY 64.2 billion a year earlier.
The revised guidance missed a consensus forecast of JPY 55.26 billion in a Reuters's poll of 11 analysts.
For the April to September half, it booked a recurring loss of JPY 10 billion, versus a profit of JPY 48.4 billion a year earlier, hit by a weak steel market and a stronger yen, which has climbed more than 10% against the US dollar this year. Steel prices in China have rallied 50% this year as Beijing's efforts to reduce a crippling overcapacity in the sector there have led to lower inventories of the alloy.
Blaming poor earnings, JFE skipped paying an interim dividend and did not give a dividend prediction for the second-half.
Source : Reuters