Mitsui CFO: China virus outbreak may slow manufacturing activity
Japan`s Mitsui & Co sees China`s coronavirus outbreak possibly slowing manufacturing activity, while slumping commodities prices, including iron ore, may weigh on its earnings, the trading house`s executive said on Tuesday
Japan`s Mitsui & Co sees China`s coronavirus outbreak possibly slowing manufacturing activity, while slumping commodities prices, including iron ore, may weigh on its earnings, the trading house`s executive said on Tuesday.
"Producing activities are expected to slow down, which means an impact could be fairly broad," Mitsui Chief Financial Officer Takakazu Uchida told an earnings news conference.
"There have been significant investor moves away from risk in commodity markets and it looks inevitable to see some impact on our earnings," he said.
Hong Kong reported its first death from the newly identified coronavirus on Tuesday, the second outside mainland China from an outbreak that has killed more than 420 people, spread around the world and raised fears for global economic growth.
Mitsui had expected a pickup in the auto and electronic parts sectors from the January-March period, but the coronavirus outbreak has overturned such a hope, he said.
Weaker activity in the auto industry may reduce demand for steel products which may also affect already under pressure iron ore prices, he said.
Iron ore futures in China fell to their lowest level in nearly three months on Tuesday, as worries mounted over the economic impact of the virus.
Mitsui owns stakes in various iron ore mines and its net profit falls by 2.1 billion yen ($19.27 million) if iron ore prices fall by $1 per tonne.
There has been no direct impact on its businesses so far from the spreading virus, Uchida said, but Mitsui is taking measures to prepare for possible force majeure or any other disruptions to the distribution of commodities and products.
Mitsui said it booked a 22 billion yen impairment loss on the Moatize coal mine and Nacala Corridor rail & port businesses in Mozambique in the October-December quarter to reflect a revision of their business plans.
Still, it kept full-year profit guidance of a record 450 billion yen for the year to March 31, saying higher profits from heavy oil trading at its energy trading unit in Singapore helped offset the one-off loss.
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"Profits from our energy trading unit grew amid rising demand for low sulphur fuel oils in the wake of new marine fuel rules," Uchida said.
From Jan. 1, the International Maritime Organization (IMO) has banned ships from using fuels with a sulphur content above 0.5%, compared with 3.5% earlier.
Meanwhile, China had on Sunday said it will help firms that produce vital goods resume work as soon as possible, state broadcaster CCTV reported on Sunday, citing a meeting chaired by Chinese Premier Li Keqiang.
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