"Japan Steel Continues Price Increase Trend... Smooth Sailing for Strong Performance Next Year"

[Asia Economy Reporter Ji-hwan Park] Hana Financial Investment on the 26th stated that Nippon Steel's selling prices continue to rise and expects strong performance to persist next year as well.

There is a forecast that sales growth will continue due to the increase in the average selling price (ASP) in the third quarter. In the third quarter of this year, Nippon Steel's sales and operating profit were 1.66 trillion yen and 172.06 billion yen respectively, marking a 49.5% increase and a turnaround to profitability compared to the previous year. The crude steel production in the third quarter was 11.37 million tons, down 4.3% from the previous quarter, and the shipment volume of headquarters products also decreased by 1.2% to 9.09 million tons compared to the previous quarter, but due to a partial recovery in the Japanese economy, steel demand slightly increased, leading to a rise in domestic prices.

Seongbong Park, a researcher at Hana Financial Investment, emphasized, "The ASP of Nippon Steel's steel products also increased by 42.8% year-on-year to 116.1 thousand yen per ton in the third quarter, driving sales growth." There is a forecast that the upward trend in ASP will continue in the fourth quarter as well. Nippon Steel raised its annual sales forecast from the previous 6.5 trillion yen to 6.7 trillion yen and operating profit forecast from 600 billion yen to 800 billion yen for the third quarter, following the second quarter.

Steel demand in Japan this year is expected to be 56.8 million tons, with a forecast that it will recover to pre-COVID 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. Researcher Park emphasized, "Demand for automotive steel will be somewhat sluggish in the fourth quarter due to semiconductor shortages and other issues, but it is expected to recover in the first quarter of next year, increasing by 9.3% year-on-year." As a result, the ASP is expected to continue rising in the fourth quarter, reaching 127.0 thousand yen per ton.

Although there is a high possibility of additional price increases for automotive steel, the stock price remains undervalued. Nippon Steel mentioned that starting from April next year, it is considering adopting a new price negotiation system targeting major customers such as automotive and electronics companies. Researcher Park stated, "Reflecting the rising prices of raw materials such as ferroalloys, there are plans to further increase prices for automotive steel products," and emphasized, "Considering the expected return on equity (ROE) of 17.5% this year, the current stock price is at a price-to-book ratio (PBR) of about 0.6 times, so valuation pressure is limited."

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