Nippon Steel In Profit Drop Shock

Japanese industrial giant Nippon Steel has today announced an unexpected fall in profits over the last quarter, despite rising metal prices, which has left market analysts confused and sent investors into blind panic over the causes of the loss and the outlook for future profitability.

The announcement saw 7.6% wiped off the value of shares in the world’s second largest manufacturer of steel, and has been taken by market analysts across the world to be a sign that the Japanese economy could be headed straight for a recession over the course of 2008, which would inevtiably have a knock on effect on global economic fortunes.

Profits at the firm fell by some 13% over the quarter, downt to 86.6 billion yen despite strong demand from emerging markets for steel as part of ongoing construction and manufacturing processes, particularly in China and India.

Nippon has justified the loss as having arisen via strong fuel prices and the increased cost of iron ore, yet analysts across markets have suggested their problems could lie in a lack of domestic demand, which is preventing the firm from passing on price increases to its core consumers.

In addition to the increase in raw material costs, shipping and distribution expenses are growing rapidly, which is leaving many businesses with substantial international trade feeling the heat on their slimming profit margins.

With the US suffering problems as a result of the credit crunch and the downturn in the housing market, and the UK experiencing the first signs of a consumer pinch and slowdown in economic growth, the news from Japan may be yet further bad news for the financial health of the global economy over 2008.

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