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Mitsui lowers profit forecast amid rout in commodity market

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Mitsui & Co, Japan's second-biggest trading house, lowered its full-year forecast 21 per cent amid a collapse in commodity prices.

[TOKYO] Mitsui & Co, Japan's second-biggest trading house, lowered its full-year forecast 21 per cent amid a collapse in commodity prices.

The company expects a profit of 190 billion yen (S$2.2 billion) in the financial year to March, down from its previous forecast of 240 billion yen, according to a statement Thursday.

The company cited the drop in iron ore, oil and natural gas prices as the reasons behind the revision.

"The downturn in iron ore prices will drag out considerably," Mitsui Chief Financial Officer Keigo Matsubara said Thursday. "It will likely continue until about 2020 due to a delay in China's economic recovery."

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Ore with 62 per cent content delivered to Qingdao has dropped 28 per cent since last year, according to Metal Bulletin Ltd.

Mitsui's net income was 3.8 billion yen for the three months ended Dec 31, down from 31.8 billion yen a year ago, according to calculations based on nine-month results.

That was the lowest quarterly profit since 2009 The global commodity slump is squeezing the balance sheets of Japan's general trading companies, which invested in metals and energy only to see prices fall. 

A wave of writedowns is forecast for Japan's trading houses, with Sumitomo Corp saying last month it expects a 77 billion-yen charge on its Madagascan nickel project.

The Bloomberg Commodity Index, a measure of returns from 22 constituents, has tumbled 40 per cent over the last two years.

Rivals Mitsubishi Corp and Itochu Corp maintained full-year profit forecasts.

Mitsubishi will review its assets as low prices have forced it to cut its price outlook on commodities, CFO Shuma Uchino said during a briefing in Tokyo on Tuesday.

Mitsubishi will proceed with cost reduction measures for its Australian coal business, he said.

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