Japan's largest steelmaker Nippon Steel on Tuesday raised its net profit forecast to 520 billion yen ($4.5 billion) for the second time this year, a significant return from a net loss of 32.4 billion yen it reported last fiscal.
The steelmaker now expects its revenue to increase 39% to 6.7 trillion yen for the year ended March. The company had previously forecast a net profit of 6.5 trillion yen and 370 billion yen, up 35% in revenue.
"Steel demand continues to recover as the world recovers from the pandemic," said Takahiro Mori, representative director and vice president of Nippon Steel.
With the steelmaker's brisk demand from other customers, Mori sees a limited impact on the company's earnings as a result of the decline in auto production caused by the global chip shortage.
Market conditions improved, with strong demand for steel products in the manufacturing and construction sectors, increasing prices and margins.
Due to the cut in steel production in China, the world's largest producer, the company expects global metal supplies to remain tight. Mori said the impact of the production cuts will outweigh the expected weak demand in China due to problems in the local real estate market.
Nippon Steel reported revenue of 3.16 trillion yen and net profit of 312 billion yen in the first six months, largely helped by the rise in product prices.
Nikkei reported that in August price negotiations between Nippon Steel and its customer Toyota Motor resulted in a significant increase.
This prompted Toyota to increase the price of the steel materials it sells to its suppliers by around 20,000 yen per tonne in the second half of fiscal 2021, its largest price increase in more than a decade.
The company said it was in talks with customers to "strengthen efforts to ensure appropriate margins" by further raising product prices in the second half of the year, as prices for raw materials such as coking coal are rising.
In October, the steelmaker sued Toyota and Baoshan Iron & Steel, a subsidiary of China's state-owned China Baowu Steel Group, for infringing its patents on non-orientated electric steel sheets used in electric vehicle motors.
Mori declined to comment on the matter. "Toyota is one of our most important customers and we hope to maintain a good relationship with the company," Mori said. said.
The steelmaker is asking 20 billion yen ($176 million) from each company.
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