TOKYO — Nippon Steel reported Friday a record net loss of 431.51 billion yen ($4 billion) for fiscal 2019 ended March due to sharp falls in demand for steel products, in a sign the new coronavirus outbreak is taking the toll on Japan’s heavy machinery sector, including autos.
The steelmaker, ranked No. 3 in the world, fell into the red from a profit of 251.17 billion yen the previous year for the first time since fiscal 2012.
The epidemic and worsening business conditions caused by fierce global competition and a shrinking domestic market are a double whammy for the Japanese steel industry, which has long supported the country’s industrialization and economic growth.
The largest Japanese steelmaker posted sales of 5.92 trillion yen, down 4.2 percent, with an operating loss of 406.12 billion yen compared to a profit of 265.11 the year earlier, as it also had to book restructuring costs.
While expecting a “significant” impact on production, shipment and market prices, Japan Steel did not provide an earnings estimate for the current business year, saying, “It is impossible to formulate an earnings forecast for FY 2020 with any realistic degree of accuracy.”
President Eiji Hashimoto told a teleconference he expects the company to continue seeing large losses in the fiscal first half through September. “We cannot avoid implementing further structural reforms that will entail pain” to return to profitability, Hashimoto said.
Even before the pandemic, Nippon Steel has been implementing massive restructuring measures and cut back domestic output as global steel prices fell after aggressive production by Chinese steelmakers caused a supply glut and China-U.S. trade frictions dented global demand.
The company said Friday it will temporarily halt two blast furnaces from early July, bringing the total furnaces that will see suspended production to six nationwide, or equivalent to around a 30 percent cut in output from levels earlier this year.
Rival steelmaker JFE Steel Corp. has also said recently it will reduce domestic output by halting two blast furnaces in Okayama and Hiroshima prefectures.
Japanese automakers, the main purchasers of steel products, have seen a sharp drop in global vehicle demand due to the coronavirus outbreak.
Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., also affected by supply chain disruptions, have temporarily suspended operations of some of their domestic plants.
Hashimoto said domestic crude steel production for the current business year could shrink by some 20 percent from around 100 million tons annually in recent years due to the pandemic.
“Even if the coronavirus is contained by the end of the first fiscal half, annual production could fall below 80 million tons,” Hashimoto said.
According to data from the Ministry of Economy, Trade and Industry, crude steel production for the April-June quarter is expected to fall 25.9 percent to 19.36 million tons, as consumption by shipbuilders, automakers and contractors falls.
On a quarterly basis, this level of production would be the lowest in 11 years since the April-June period in 2009 following the collapse of Lehman Brothers Holdings Inc.