Nippon Steel Corp, the world's No 5 steelmaker, expects to return to a profit this year, after a loss last year, as gas drilling activity is on the rise to meet higher demand for non-Russian fuel.
As demand for non-Russian gas increases, demand for seamless pipes is growing, according to Takahiro Mori, executive vice president, told Reuters on Wednesday, "we are getting an increasing number of inquiries for seamless pipes."
He said that the weak yen will definitely help as our seamless pipe business will turn to black ink this financial year.
Japan's leading steelmaker is one of the world's top producers of high-end seamless pipes used for drilling oil and gas.
The once highly profitable business had been hit in recent years due to government efforts to switch off fossil fuels and the impact of COVID-19, due to a slowdown in oil and gas exploration.
After Russia invaded Ukraine, the recent surge in demand and prices for gas has spurred investment in production.
As Russia and Ukraine are unable to export as much pig iron and semi-finished steel products, Nippon could find increased sales opportunities, according to Mori.
Even though there are positive aspects in supply, the negative aspects of demand and raw materials prices are far outweighed them, he said.
Nippon Steel reported a net profit of 637 billion US $5 billion for the year ended Mar 31, the highest since its acquisition of Sumitomo Metal Industries in 2012.
The strong performance came from demand improving after a slump caused by the Pandemic, and from Nippon Steel's ability to pass on soaring materials costs to key customers such as automakers.
Nippon Steel did not provide a forecast for this year, but Mori said it wanted to generate 600 billion yen in business profit without one-off factors, compared to 690 billion yen a year ago, while also raising product prices by 30,000 -- 40,000 US $236 -- US $315 a tonne to cushion rising costs.
Mori said the biggest risk for Nippon Steel would be if raw material prices kept rising while the steel market stagnated.
He expected the steel market to improve, and noted that Chinese steel mills were unprofitable at current prices for steel.
In 2022, global steel demand will likely remain the same as last year, but we are not pessimistic as we see growth prospects in our main battlegrounds like India and the United States, according to Mori.