Nippon Steel fears lower profit from US tariffs

Japanese company Nippon Steel Corp. said any move by Washington to impose tariffs on Japanese cars and auto parts would hamper its revenues, but expected the direct impact of proposed tariffs on US imports from Mexico to decrease.

In an effort to curb the surge in illegal immigration, US President Donald Trump said last week that he will target all goods arriving from Mexico with a 5 percent tariff from June 10, increasing to 25% unless Mexico takes immediate action.

The move angered global markets worried about a new front in the US trade war.

“The new tariffs are likely to have little impact on our business as the steel we export to Mexico is processed in our local joint venture and sold to carmakers in the country,” Nippon Steel's executive vice president Katsuhiro Miyamoto said in an interview on Friday. ,

While these automakers will be hit by tariffs, the initial 5% tariff may at least not have a significant impact due to the healthy US economy and the competitiveness of the cost of cars made in Mexico, Miyamoto said.

The Nippon Steel joint venture in Mexico has an annual production of 420,000 tonnes of galvanized steel used in automotive parts, compared to the company's total annual steel production of about 41 million tonnes.

The world's third-largest steelmaker believes potential US tariffs on Japanese cars and auto parts are more worrisome. This sector accounts for about 40% of its annual production, including specialty products with high margins.

Trump said last month that some imported vehicles and parts pose a threat to national security, but delayed a decision by six months on whether to charge vehicles from Japan and the European Union up to 25%.

“Japan not only exports cars to the United States, but also a significant volume of auto parts, including key safety components made from special steel,” Miyamoto said.

"Any large American tariffs on cars and car parts will affect our revenues as well as the wider industry in Japan."
Rising prices for

Nippon Steel also expects iron ore prices to remain high for some time after the closure of dams at some of Vale's Brazilian mines and weather-related losses in Australia, Miyamoto said.

“Iron ore prices are up 20-30 percent from our forecast for the current fiscal year (through the end of March 2020),” he said.

“Given the record steel production in China