Mitsubishi Corp and Mitsui & Co, Japan’s biggest and second-biggest trading houses by assets, returned to profitability in the financial year to end-March, boosted by rising prices for coal and iron ore. Even after years of trying to diversify their operations into non-cyclical businesses, results from Japan’s “big five” trading houses have underlined their continued vulnerability to swings in commodities prices.
Mitsubishi on Tuesday reported net profit of 440 billion yen ($3.88 billion) in the last financial year, against a loss of almost 150 billion yen a year earlier, while Mitsui posted a 306 billion yen profit, up from an 83 billion yen loss. Also on Tuesday, Sumitomo Corp said profit for the financial year more than doubled to just over 170 billion yen, while Marubeni reported a 150 percent gain in profit to 155 billion yen.
Itochu Corp, the least dependent among the big five trading houses on resources, last week reported record profit, partly driven by the rise in prices. All of them are expecting profits in the current financial year to improve, even as prices have come off in recent weeks.
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Like global miners, Japanese traders are basking in a welcome surge in commodity prices on the back of a renewed appetite in China for imported raw materials. In the year before, the top five trading houses clocked up a total of about 1 trillion yen ($8.9 billion) in write-offs due to a slump in valuations, with Mitsubishi and Mitsui announcing their first annual losses since they were founded after World War Two.
Commodity prices, however, remain volatile. The price of coking coal more than trebled between March and late November 2016, then halved through March 2017. Iron ore prices have also come off sharply in the past two months.
($1 = 113.2900 yen) (Reporting by Yuka Obayashi; Editing by Aaron Sheldrick and Richard Pullin)