Yuka Obayashi, Ritsuko Shimzu

TOKYO (Reuters – Nippon Steel Corp. is the No.5 global steelmaker. It expects to turn a profit from last year’s loss. Gas drilling activity has increased to satisfy higher non-Russian fuel demand.

According to Takahiro Morai, executive vice president of Reuters, “We’re getting more inquiries about seamless pipes because demand for non Russian gas is increasing.” He cited the Middle East as an example where this demand comes from.

He said, “Our seamless pipes business will certainly turn to black ink as the weakening yen also assists.”

Japan’s most important steelmaker is a major manufacturer of seamless high-end pipes for drilling oil or gas.

In recent years, this once-profitable industry was affected by both a slowdown of oil and gas exploration as a result of ongoing government campaigns to shift away from fossil fuels, and the COVID-19 epidemic.

The recent rise in prices and demand for gas following Russia’s invasion has encouraged investment in the production.

Mori stated that Nippon may also be able to find more sales opportunities due to Russia and Ukraine not being able export as much of pig iron or semi-finished steel products. However, he cautioned.

He stated that even though there may be positive aspects to supply, they are outweighed by the negative effects on demand and prices for raw materials.

Nippon Steel posted a net profit (in dollars) of 637 trillion yen for the March 31 year. This is the most since Sumitomo Metal Industries was acquired in 2012.

Nippon Steel’s ability, to pass high material costs on to customers like automakers, was responsible for the strong performance.

Nippon Steel provided no forecast, however Mori indicated that the company aims at generating 600 billion yen of business profit, compared to 690 billion in a year prior. The company also plans to boost product prices by 30,000 to 40,000 yen ($236-3155) per ton to help offset rising costs.

Mori indicated that Nippon Steel’s greatest threat would come from rising raw material prices while the steel market stagnates.

However, he expects the steel market’s improvement and points out that Chinese steel mills are unprofitable given current steel prices.

Mori stated that while global steel demand will probably remain the same as last year in 2022, we don’t believe this is a sign of weakness. However, we do not think it is pessimistic because we can see growth opportunities in major battlegrounds such as India and America.

($1 = 126.9000 yen)