Nippon Steel Eyes $480m In Cost Cuts In Fiscal 2016

18 June 2016

Nippon Steel & Sumitomo Metal will work to lower costs by slightly more than 50 billion yen ($479 million) in the year ending next March, up from last fiscal year's 40 billion yen or so.

"We will pursue a goal of achieving over 50 billion yen [in cost cuts] by implementing spending reduction plans ahead of schedule and adding more measures," Executive Vice President Toshiharu Sakae told The Nikkei in a recent interview.

The company has yet to offer an earnings outlook for fiscal 2016 but faces a harsh business environment due partly to worsening conditions in steel markets abroad.

Nippon Steel has already reduced fixed costs by turning off a blast furnace at its Kimitsu works in Chiba Prefecture this March. The move also helps boost productivity by pushing up the utilization rates of the facility's other two blast furnaces.

With refurbishment of aging coke ovens partially completed at Kimitsu and at the Kashima works in Ibaraki Prefecture, "the effects of lower materials costs and more stable furnace operations will start flowing through in the latter half of the year through March 2017," Sakae said.

The company aims to reduce costs by a total of 150 billion yen under its three-year business plan through fiscal 2017.

"China's supply pressure remains at a historic high," Sakae said.

Excess production capacity in China continues to affect steel prices around the world as the country's steelmakers flood markets with cheap exports.

But with demand growing in Southeast Asia, Nippon Steel's "export prices are bottoming out," Sakae said.

"Our earnings will hit bottom in the April-June period and start a gradual recovery in the July-September quarter," he predicted.


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