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Steel costs nibble away at Mitsui profits

Steel costs nibble away at Mitsui profits

Tokyo: Yasuhiko Katoh (pictured), president and representative director at Mitsui Engineering & Shipbuilding, Japan's second-largest shipbuilder, has stated that the company may miss its full-year profit forecast and is considering overseas production because of an "unexpected rise'' in steel prices, reports Bloomberg.

"Steel costs would be about 30% higher than our initial estimate for the current year," Katoh said. "A big rise in steel prices is the biggest problem in securing profit. It's quite difficult for us to ask ship owners and charters to raise our prices. We have to tackle this problem. We have to increase our production rate."

Sales from bulk carriers, container cranes and marine engines are failing to keep up with rising material costs and a stronger yen that trims the value of repatriated earnings for Japanese shipbuilders. Mitsui Engineering forecast in May operating profit for the year to March 31 will fall 3.1% to 35bn yen ($325m) from a record profit a year ago.

Tokyo-based Nippon Steel Corp. will increase contract prices of steel plates for domestic shipbuilders about 40% or 30,000 yen ($279) a ton, by Sept. 30, steel traders said June 18.

The company may consider building ships in lower-cost nations, such as Vietnam and China, Katoh said. "Although we're not considering halting domestic production, it's necessary for us to think seriously about measures to tackle high costs and labour shortages,'' he said. "One of the options is to start overseas production.''  [07/08/08]

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