Reuters reporter that Japan's top steelmakers Nippon Steel Corporation and JFE Holdings Inc slashed their full year profit outlooks by about 20%, hit by a rapid deterioration in Asia's steel market after booking quarterly earnings about half of last year's levels.

Ebbing demand in China, the world's biggest consumer and producer, and an uncertain global economy, are weighing heavily on the profits of Asian steelmakers already reeling from a supply glut and sagging regional prices.

Japanese steelmakers, heavily exposed to Asia's steel market, face an even tougher outlook due to a strong yen and prices that are expected to fall further in the export market.

Nippon Steel slashed its outlook for recurring profit for the year to March 2012 to JPY 180 billion from its projection of JPY 230 billion only three months ago. That compares with an average estimate of JPY 206.8 billion in a poll of 18 analysts by Thomson Reuters.

JFE also cut its full year profit forecast to JPY 100 billion from its July estimate of a JPY 130 billion profit. The estimate is below analysts' consensus of JPY 121 billion profit and would mark a 40% drop from a year ago.

Mr Takashi Aoki, vice president of equity investment at Mizuho Asset Management, said that "JFE's new earnings outlook now appears to fully reflect the deteriorating environment, giving a relief to investors, but Nippon Steel's outlook is still not bad enough."

Falling prices of spot iron ore will ease cost pressure but analysts caution that steel prices may fall more sharply than the cost of iron ore, as steelmakers negotiate their purchase of the key steelmaking ingredient on a quarterly basis.

Steelmakers have yet to fully pass on higher iron ore costs incurred early this year and will face vocal calls from carmakers and other customers for large price cuts as raw material prices fall.

Source: www.reuters.com