"Japan Steel, Sales Price Increase Cycle... Expectation of Revenue Growth"

[Asia Economy Reporter Minji Lee] Nippon Steel is expected to continue its sales growth trend through price increases. Considering the current stock price, there is also an opinion that valuation pressure is low, so expanding interest would be advisable.

On the 26th, Nippon Steel's stock price rose 3.76% over the past month to 1,874 yen. This is analyzed as reflecting expectations of sales growth due to price increases.

In the third quarter, Nippon Steel recorded sales and operating profit of 1.66 trillion yen and 172 billion yen respectively, marking a 49.5% increase year-on-year and a return to profitability. Seongbong Park, a researcher at Hana Financial Investment, explained, “As the Japanese economy partially recovers, steel demand has increased, leading to a rise in domestic prices. The average selling price of Nippon Steel’s steel products rose to 116,000 yen per ton in the third quarter, driving sales growth.” In the third quarter, crude steel production was 11.37 million tons, down 4.3% from the previous quarter, and the company’s product shipments also decreased by 1.2% to 9.09 million tons compared to the previous quarter.

Nippon Steel is expected to see sales growth due to price increases. Following the second quarter, the annual sales forecast for the third quarter was raised from 6.5 trillion yen to 6.7 trillion yen, and operating profit was also revised upward from 600 billion yen to 800 billion yen.

Japan’s steel demand this year is expected to reach 56.8 million tons. In particular, it is forecasted to recover to pre-COVID-19 levels starting from the fourth quarter. Steel demand in manufacturing is expected to increase by 8.2% year-on-year to 35.8 million tons.

Demand for automotive steel is expected to slow somewhat in the fourth quarter due to semiconductor shortages and other issues. However, it is projected to recover in the first quarter of next year, increasing by 9.3% year-on-year. Accordingly, the average selling price is expected to continue rising in the fourth quarter, reaching 127,000 yen per ton. However, the annual production forecast is expected to decline by 0.7% to 45.7 million tons compared to the August forecast of 46 million tons, reflecting the decrease in third-quarter crude steel production.

Meanwhile, Nippon Steel announced that starting from April next year, it is considering adopting a new pricing negotiation system targeting major customers such as automotive and electronics companies. The contract period will be shortened from six months to three months, and whereas transportation was previously conducted even before negotiations were finalized, it will now proceed only after agreements are reached. Researcher Seongbong Park analyzed, “Reflecting the rising prices of raw materials such as ferroalloys, steel prices for automotive use will also be further increased. Considering the expected ROE of 17.5% this year, the current stock price is at a PBR of about 0.6 times, so valuation pressure is limited.”

This content was produced with the assistance of AI translation services.