Too big to falter: Behind the birth of a global steel giant

Oct 21, 2013 | 04:58 PM | Jo Isenberg

Tags  Hebei Steel, Baosteel, NSSMC, Nippon Steel & Sumitomo Metal Corp., Jo Isenberg

Caught in a blistering crossfire, Japan’s top and third-largest steelmakers revisited a formula that transformed that nation’s sector from a war-torn industry in the mid-1940s into a global steel powerhouse three decades later.

Newly merged and almost 40 years after what some consider a peak year for the Japanese steel industry in 1973, Nippon Steel & Sumitomo Metal Corp. (NSSMC) today finds itself in the midst of a battle as heated as either faced alone.

The combined entity is counting on pure size (economies of scale), technological prowess and a carefully focused drive into select downstream joint ventures with local partners in key emerging markets to answer the competitive challenges posed by upstart mills in China, South Korea and Taiwan. NSSMC, along with Japan’s other major integrated mills, is waging what might be called the War for the East and the growth in steel consumption that the region promises against a backdrop of a slumping global economy abroad and 10 years of deflation, a stubbornly high yen and years political dysfunction at home.

Based on 2012 crude steel production data from the World Steel Association, the Nippon Steel Corp./Sumitomo Metal Industries Ltd. merger created the world’s second-largest steelmaker--sporting a combined 47.9 million tonnes of capacity, well behind ArcelorMittal SA’s 93.6 million tonnes but ahead of the 42.8 million tonnes at China’s Heibei Iron & Group Co. Ltd.

Although officially finalized Oct. 1, 2012, the roots of the merger date back almost a decade, Shinya Higuchi, representative director and executive vice president and member of the board, told AMM in an exclusive interview at NSSMC’s Tokyo headquarters late last year.....

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