A ranking was prepared for 16 steelmakers using “interest-rate shock severity,” an estimate of the increase in interest payment burden if refinancing rates rose by 1%, focusing primarily on companies with borrowings and bonds due for repayment or redemption within 2 years. Kobe Steel ranked 12th, while JFE Holdings was near the top.
The environment surrounding the steel industry is becoming increasingly challenging, amid rising raw material and energy prices and sluggish steel market conditions in China. Based on the repayment and redemption schedules for interest-bearing debt as of the fiscal year-end, we independently estimated the impact of higher interest rates on interest expense and ranked steelmakers using an indicator called “interest-rate shock severity,” which measures the degree of pressure on earnings.
The analysis covered interest-bearing debt scheduled for repayment or redemption within 2 years. We calculated the increase in interest payment burden if refinancing rates rose by 1%, as well as that increase as a percentage of average operating profit over the latest 3 fiscal years. As the Bank of Japan’s policy rate and long-term interest rates continue to rise, the scale of the impact is expected to vary by company depending on the combination of repayment timing and total borrowings. The following pages detail the ranking of steelmakers and the degree of impact on each company.