Japanese steel sector resets focus, aims high

Apr 12, 2013 | 02:03 PM | Jo Isenberg-O’Loughlin

Tags  Japanese steel industry, transition, Japan Iron and Steel Federation, JISF, Nippon Steel & Sumitomo Metals Corp., NSSMC, JFE Steel, Kobe Steel Nisshin Steel

NEW YORK — The official headquarters address of the Japan Iron and Steel Federation might be 3-2-10 Nihonbashi-Kayabacho, Chuo-Ku, Tokyo, but ask any of the 110-plus iron and steel producers, trading companies and trade associations that are members of the organization where they do business daily, and the more outspoken among them will tell you between a very, very large rock and a very, very hard place.

Two decades of deflation, economic stagnation, the Fukushima earthquake, tsunami and nuclear disaster, a persistently strong currency (until the recent advent of "Abenomics," or easing of monetary policy to spur demand, under Prime Minister Shinzo Abe) and three recessions in five years will do that to you.

Add to those challenges declining domestic demand, rising steel imports and aggressive neighboring economies, namely China and South Korea, which are busy expanding their own steelmaking capacity and along the way bridging the technology/quality gap that Japanese mills long enjoyed over their global competitors. In a telling move, Toyota Motor Corp. recently added Korea’s Posco Ltd. to its list of top suppliers. Media reports noted that Posco was the first non-Japanese steelmaker to be added to the list, which is said to represent the top 1 percent of Toyota’s suppliers.

Japan’s steelmakers don’t have a monopoly on tough times, as a quick look at the current AMM price for Midwest hot-rolled carbon sheet ($29.50 per hundredweight, or $590 per ton) or the per-share price of major publicly held U.S. steel producers underscore. But the sheer complexity and ever-changing intermix of macroeconomic, geopolitical, monetary and demographic factors that Japanese mills face at home and abroad are daunting, so much so that they have forced Japan’s major mills—Nippon Steel & Sumitomo Metal Corp. (NSSMC), JFE Steel Corp., Kobe Steel Ltd. and Nisshin Steel Co. Ltd.—to rethink their approach to growth and refocus their energies, assets and capital to capture the opportunities promised by the fast-emerging Association of Southeast Asian Nations (Asean) region.....

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