Risk of weak demand, China’s overproduction, and fluctuations in steel product and scrap prices

「Recently, there has also been a risk that procurement prices, including energy prices, could surge because of the prolonged situation in the Middle East, potentially affecting the Group's performance.」

「During the first half, the domestic economy continued to face downward pressure from weaker consumer sentiment caused by high prices, stagnant industrial production, and the impact of U.S. tariff policy. Construction demand, our main end-market, has been slower than expected to recover from its weakness caused by surging material and equipment prices and labor shortages. The environment also remained challenging as electricity prices and logistics costs rose further.」

「Our operating environment is becoming increasingly challenging, as no substantial recovery in construction demand is expected and further increases in electricity tariffs and other costs are anticipated. In addition, demand trends in the Indonesian business have become uncertain because the government's policy shift reduced the infrastructure development budget, and the challenging operating environment is expected to continue.」

「Domestic steel demand has remained at a low level because construction work has stagnated under the impact of higher prices and labor shortages. Demand in East and Southeast Asia, our main export markets, has also been weak, as construction investment has been restrained by higher interest rates resulting from monetary tightening in each country. From a cost perspective, although iron scrap prices, the primary raw material, have fluctuated sharply with exchange rate movements, there has been no change in the structural conditions keeping them elevated. In addition, higher electricity and logistics costs resulted in the continuation of a challenging cost environment.」

「Domestic steel demand is expected to recover to some extent after the COVID-19 pandemic subsides, but not to its previous level, and is recognized as undergoing structural contraction.」

「Meanwhile, the Group's operating environment became challenging because of weak demand for construction steel, persistently high iron scrap and fuel and raw material prices, and surging material prices caused by higher construction material and labor costs.」

「However, domestic demand for steel products remained below the previous year's level because demand for construction steel, one of our main end-markets, was affected by higher construction costs resulting from surging material, labor and logistics costs. From a cost perspective, in addition to persistently high fuel and raw material prices, the effects of rising prices and labor costs spread to various material costs, repair expenses and subcontracting expenses, among others, resulting in a challenging environment in which manufacturing costs rose further.」

「During the first quarter, the Japanese economy and the Indonesian economy, where we operate, both recovered modestly. However, the Group's operating environment remained challenging, as construction demand continued to be weak, as in the previous fiscal year, while iron scrap and electricity prices remained elevated.」

「Meanwhile, the operating environment surrounding the Group became challenging as the recovery in demand for construction steel, its main end-market, lacked momentum for small and medium-sized projects, while manufacturing costs increased substantially because iron scrap prices, its primary raw material, remained elevated and higher crude oil and gas prices increased energy purchase costs.」

「Meanwhile, domestic steel demand generally declined year on year, particularly in the automotive sector, while demand from the construction industry, one of our main end-markets, remained weak. Construction demand in Indonesia likewise remained at a low level. Under these conditions, the domestic price of iron scrap, the primary raw material, surged to above ¥60,000 per tonne for the first time since 2008, while rising resource prices also increased the manufacturing cost burden,」

「Although there were signs of recovery in demand for construction steel, its main end-market, the recovery in small and medium-sized projects remained sluggish. In addition, manufacturing costs increased as resource and energy prices rose substantially year on year, and the challenging operating environment continued.」

「Recently, raw material prices have remained high owing to the recovery of the domestic and overseas economies, the trend toward greater use of iron scrap in decarbonization efforts, and the worsening situation in Eastern Europe, among other factors.」

「Although demand in the construction market, its main end-market, has been recovering, the recovery in small and medium-sized projects remains sluggish, particularly outside large projects. In addition, manufacturing costs rose substantially because iron scrap prices, its primary raw material, remained elevated and higher crude oil and gas prices increased energy purchase costs.」

「The operating environment for the Group also remained challenging, as the recovery in demand for construction steel, its main end-market, lacked momentum, while a sharp rise in the price of iron scrap, its primary raw material, increased manufacturing costs.」

「Regarding the business environment surrounding our Group going forward, steel demand is expected to recover as economic activity recovers from the sharp downturn caused by COVID-19. However, over the medium to long term, domestic demand for construction and civil engineering steel is expected to contract structurally and is not expected to return to pre-pandemic levels even after the pandemic ends. On the cost side, challenging conditions are also expected to continue, including persistently high iron scrap prices as China resumes scrap imports.」

「Our Group's business environment also deteriorated significantly because domestic steel demand remained weak and iron scrap prices, the main raw material, surged.」

「In the ordinary steel electric arc furnace industry to which our Group belongs, demand for construction and civil engineering steel, the main source of demand, remained weak because of the spread of COVID-19. In addition, lower steel selling prices and higher iron scrap prices, the main raw material, caused the business environment to deteriorate significantly.」

「Our business environment also deteriorated significantly because of weak demand for construction steel, our main source of demand, lower selling prices, and sharp fluctuations in iron scrap prices, the main raw material, together with sharp foreign exchange fluctuations in Indonesia, where our overseas subsidiary is located.」

「In addition, the recent stagnation of domestic and overseas economic activity resulting from the spread of COVID-19 is having a significant impact on steel demand. This may adversely affect our Group's operating results.」

「In the ordinary steel electric arc furnace industry to which our Group belongs, iron scrap market prices, the main raw material, softened from April, but demand for construction and civil engineering steel, the main source of demand, remained weak. Prices for auxiliary materials and key supplies remained high, resulting in continued challenging business conditions.」

「In the steel industry, domestic demand for construction and civil engineering steel remained weak, while demand from manufacturers, including industrial machinery makers, also remained subdued. Overseas steel market prices trended lower as billet market prices softened. In the ordinary steel electric arc furnace industry to which our Group belongs, iron scrap market prices, the main raw material, softened from April, but demand for construction and civil engineering steel, the main source of demand, remained weak. Prices for auxiliary materials and key supplies remained high, resulting in continued challenging business conditions.」

「In the ordinary steel electric arc furnace industry to which our Group belongs, business conditions were challenging because domestic steel demand remained weak and manufacturing costs remained high as a result of surging key supply prices.」

「In the ordinary steel electric arc furnace industry to which our Group belongs, demand conditions remained firm, but manufacturing costs increased because scrap and auxiliary material prices, the main and auxiliary raw materials, remained high, key supply prices rose further and energy prices increased. In addition, transportation costs were trending higher because of labor shortages and other factors, resulting in continued challenging business conditions.」

「In the ordinary steel electric arc furnace industry to which our Group belongs, demand for construction and civil engineering remained firm, but manufacturing costs were forced higher by increases in key supply prices.」

「In the ordinary steel electric arc furnace industry to which we belong, steel demand remained firm, but manufacturing costs increased because scrap prices, the main raw material, remained high and began to rise further after the summer, while high prices for auxiliary materials, key supplies and fuel continued, resulting in continued challenging business conditions.」

「In the ordinary steel electric arc furnace industry to which our Group belongs, demand for construction and civil engineering remained firm, but manufacturing costs increased because of higher energy unit prices and key supply prices, resulting in continued challenging business conditions.」

「Although domestic construction demand, which accounts for the majority of demand for our business, is expected to continue declining over the medium to long term, concerns remain about further increases in auxiliary material prices, key supply prices, energy prices and transportation costs, together with volatility in scrap prices, and challenging conditions are expected to continue. In the ordinary steel electric arc furnace industry to which our Group belongs, demand remained firm, but costs increased significantly because scrap prices rose and remained high, while auxiliary material prices, key supply prices and transportation costs also increased.」

「In the ordinary steel electric arc furnace industry to which we belong, demand conditions improved, but manufacturing costs increased because of surging prices for scrap, the main raw material, as well as auxiliary materials and key supplies, resulting in continued challenging business conditions.」

「In the ordinary steel electric arc furnace industry to which we belong, manufacturing costs increased because scrap prices, the main raw material, surged and remained high, while auxiliary material prices and other costs also rose. Although we worked to improve selling prices with the understanding of our customers, margins contracted, resulting in continued challenging business conditions.」

「In the ordinary steel electric arc furnace industry to which our Group belongs, domestic steel demand remained sluggish, while manufacturing costs increased because of higher energy unit prices and auxiliary material prices, resulting in continued challenging business conditions.」

「In the ordinary steel electric arc furnace industry to which we belong, demand for construction steel in the domestic market was recovering, but scrap prices, the main raw material, began to rise again as blast furnace raw material prices surged. The impact of overproduction by China's steel industry also continued, resulting in continued challenging business conditions.」

「In the steel industry, domestic steel demand, including demand for construction, remained generally subdued. The export environment for steel was challenging because the yen appreciated more than expected, in addition to the impact of overproduction and high-volume exports by China's steel industry. In the ordinary steel electric arc furnace industry to which we belong, scrap prices, the main raw material, remained stable, but domestic steel demand remained weak and the export environment deteriorated, resulting in continued challenging business conditions.」

「In the ordinary steel electric arc furnace industry to which we belong, scrap prices, the main raw material, turned downward after rising, and domestic steel demand for construction and civil engineering showed signs of recovery. However, overseas steel market prices fluctuated sharply because of China's overproduction and high-volume exports, resulting in continued challenging business conditions.」

「The domestic ordinary steel electric arc furnace industry has excess supply capacity relative to demand, creating a risk of a collapse in selling prices due to overproduction and excessive sales. There are also risks of declines in overseas steel market prices resulting from increased steel production in East Asian countries, particularly China, as well as surges and sharp volatility in the prices of iron scrap, the main raw material, and ferroalloys and other auxiliary materials.」