Reuters reported that Tokyo Steel Manufacturing has warned that it would post an annual operating loss due to higher materials costs, dashing analysts' expectations for a profit.

The company, which makes H beams and other steel products used in construction, said that it expected to post an operating loss of JPY 3.7 billion for the year to March 2010, a sharp swing from its prior forecast profit of JPY 5.3 billion.

Tokyo Steel said in a statement that "The cost of steel scrap will likely stay at a high level due to an expansion of steel production in emerging economies."

Tokyo Steel said this week it would raise prices to offset higher costs of steel scrap in its first across the board price hike since September 2009.

According to a survey of 15 analysts by Thomson Reuters, the new forecast is also much worse than the market consensus for a profit of JPY 2.7 billion.

Tokyo Steel's earnings have been under pressure due to the high price of steel scrap and a prolonged slump in Japan's construction market as companies rein in spending on new plants and consumers refrain from buying new homes.