Nippon Steel to cut capex spending as U.S.-China trade war crimps demand

Nippon Steel Corp will cut its planned capital expenditures for the three-year period to March 2021 by between 10% and 20% as weaker steel demand amid the U.S.-China trade war has eroded its profits, a company official said on Friday.

With a planned capital expenditure budget of 1.7 trillion yen ($16 billion) during the period, the company could cut between 170 billion to 340 billion yen ($1.6 billion to $3.2 billion) in spending.

Slowing global steel demand for automobiles and machinery because of the trade row and higher materials costs have battered Japanese steelmakers’ quarterly earnings, forcing them to cut their annual forecasts or give bleak guidance.

Earlier this month, Nippon Steel, Japan’s top steelmaker, reported a 33% drop in business profit for the April to June quarter and predicted a 56% plunge in profit for the year through March 2020.

The world’s third-biggest steelmaker said at the time that it would reduce planned capital expenditure and sell assets worth 200 billion yen in light of the slumping earnings and to maintain financial health.

“We have already largely picked targets worth about a 10 percent cut,” Yuichiro Kaneko, head of the investor relations department at Nippon Steel, said.

Some planned spending on regular maintenance or upgrades for its domestic plants will be delayed, while spending to bolster the efficiency of some production facilities may be delayed as it prioritizes repairs and upgrades on the facilities with higher efficiency, he said.

Nippon Steel Executive Vice President Katsuhiro Miyamoto told earlier this week that it aims to raise product prices and boost productivity by streamlining its manufacturing structure to help shore up faltering earnings.

Demand for flat steel used in automobiles and machinery is slowing in China, prompting fears of an increase in regional exports at a time when the broader Asian economy is stumbling due to trade war, he told in an interview.

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