Prices for oil and other resources have nosedived in Japan in the recent past. In Tokyo, these lower prices are affecting Japan’s leading companies hard. They are partially undercutting the benefits of cheaper import trades for this resource-poor country.
Mitsui & Co. said on Thursday that it posted a 24% decline in the total profit in the April-June quarter to ¥97 billion ($777 million). Being the second-largest trading house by market capitalization the company commented that the sloping resource prices in China due to the weak demand are causing great impact on the businesses, said CEO Mitsui.
The shrinking demand for infrastructure in China whereby the real-estate market is cooling down, the resources prices are weighed on. The steel materials which have been unused in China are highly exported to Southeast Asia further affecting the business in the overall region, he added.
Japan’s many trading companies have played an integral role in the overall economy for more than a century. They are the leading investors in oil, coal, natural gas, and minerals across the globe. Due to this, they become sensitive to price swings such as the recent fall in iron ore, coal prices, and oil. The oil prices have been trading below $50 a barrel in Europe and the U.S.
In the April-June quarter, Mitsui’s announced the net profit to fall 32% to ¥75 billion. CEO added that there is a time lag between falling resource prices and the actual boom in the business. The company expects rise in the prices later this year.
He also expressed his concerns about China’s slow economic recovery that has made some impact on steel materials from a slump in property investments.
Overall, the lower energy prices are good for Japan as the country must import all of its oil and natural gas. The crude-oil imports declined more than 40% in value terms with the same period in the previous year. This saved Japan the equivalent of more than $15 billion.
China’s construction and real-estate market and its financial volatility still remain as the main concerns for CEO Tsuyoshi Hachimura, China.