Nippon Steel suspends blast furnaces in Hiroshima and Kure - domestic production capacity reduces by 10%

Recently Nihon Keizai Shimbun Electronic version reported the following:

日本製鉄、広島・呉の高炉休止　国内生産能力1割減

貿易摩擦 環境エネ・素材 アジアBiz 中国 広島

2020/1/30 18:00日本経済新聞　電子版

日本製鉄は呉製鉄所（広島県呉市）に現在2基ある高炉を休止する方針を固めた。国内の生産能力を1割削減する。同製鉄所は鋼板製造ラインも含めた将来の全面閉鎖も検討する。鉄鋼業界は保護主義の広がりと中国企業の大増産で市況が悪化し、日本勢のアジア向け輸出の競争も激しくなっている。世界的に生産能力は過剰で、競争力の低い製鉄所の淘汰が広がる可能性がある。

世界鉄鋼協会によると、2019年の世界の粗鋼生産量は18億6990万トン。経済協力開発機構（OECD）の推計では18年時点の世界の鉄鋼業の生産能力はこれを約4億トン上回る。日本の粗鋼生産量の4倍の規模の過剰能力を世界で抱えている計算だ。15年の7億トンからは縮小したが、2億トン前後の07年までと比べ依然として高い水準にある。

日鉄は2月7日にも呉製鉄所の高炉休止を発表する。数年以内に実施する。同製鉄所の粗鋼生産量は19年3月期で273万トン。生産能力は日鉄グループ全体の7%に相当する量だ。呉の高炉は1基を残し能力を増強する計画だったが、2基とも休止する方針に転換した。

日鉄は北九州市にある高炉1基も21年3月末に休止することを決めている。日鉄グループの国内の生産能力は現在の5400万トンから1割程度減る見通しとなる。

呉製鉄所は呉海軍工廠（こうしょう）の跡地に1951年に建設された。子会社の日鉄日新製鋼が運営し、自動車の高機能鋼板となる鋼材などを製造している。規模がグループ内の他の製鉄所と比べても小さく、製鉄所全体の閉鎖も検討する。

日鉄は呉を閉鎖する場合、1000人程度いる従業員の配置転換などを検討するもよう。協力会社を含めた3000人以上の雇用に影響する可能性がある。高炉のある製鉄所を全面閉鎖すれば日鉄グループにとって創業以来、初めてとみられる。

鉄鋼業界の経営環境は急速に悪化している。米中貿易戦争による景気減速で、自動車など製造業を中心とした鋼材需要が減少。最大の生産国である中国は、政府の景気刺激策で過去最高のペースで鉄の増産を続ける。鉄鉱石など原材料価格は高止まりする一方、鋼材市況の低迷が続く二重苦に直面している。

中国勢は国外への投資拡大に動く。日本鉄鋼連盟によると、東南アジア諸国連合（ASEAN）では今後、中国勢による能力増強計画が5千万トン強あるという。英国では経営破綻した旧国営のブリティッシュ・スチールを、中国企業が買収する。増産競争が再燃する可能性は残る。

これまで日本の高炉大手は細る内需を輸出で補い、国内の生産能力を維持してきた。生産量に占める輸出比率は約4割に達する。足元では東南アジアやインドなどの地場メーカーも成長し、競争が激しい。

19年の日本国内の粗鋼生産量は10年ぶりに1億トンを割り込んだ。国内各社の粗鋼生産能力は合計1億3000万トン程度あるとされ、約3割の過剰能力を抱える。

日鉄の収益は悪化している。20年3月期の連結事業利益（国際会計基準）は前期比7割減の1000億円を見込む。構造改革を進めなければ一段の悪化は避けられないと判断し、大幅な生産能力の削減を決断した。呉から自動車メーカーなどに供給する鋼材は今後、日鉄の他の製鉄所からの供給に応じてもらうよう顧客と協議する。

国内ではJFEホールディングスなど他の鉄鋼大手も同様の設備過剰に直面する。国内の鉄鋼大手は自動車など製造業向けを強みとする。高炉から圧延設備までを備えた製鉄所で生産した半製品を輸出して、海外で加工し日系メーカーなどに供給してきた。製造業向けの輸出不振が続き、内需も増えない状況が続いており、業界全体でリストラの動きが広がる可能性が大きい。

Translation

Nippon Steel had decided to suspend its two blast furnaces at the Kure Works (Kure City, Hiroshima Prefecture). It would reduce domestic production capacity by 10%. The steelworks might also consider a future full closure, including the steel plate production line. In the steel industry, the spread of protectionism and the large increase in production by Chinese companies had worsened market conditions; and the competition for Japanese exports to Asia had become fierce. Overcapacity globally could lead to widespread culling of less competitive steelworks.

According to the World Iron and Steel Association, global crude steel production in 2019 would be 1,869.9 million tons. The Organization for Economic Co-operation and Development (OECD) estimated that the global steel industry's production capacity in 2018 would exceed this by about 400 million tons. It was calculated that the world had an overcapacity four times larger than Japan's crude steel production. Although it shrank from the 700 million tons of 2015, it was still at a high level compared to the 2007 of around 200 million tons.

Nippon Steel announced the closure of the blast furnace at Kure Works on February 7. This would be implemented within a few years. Crude steel production at the steel plant was 2.73 million tons in the year ending March 31, 2019. The production capacity was equivalent to 7% of the entire Nippon Steel Group. There was once a plan to increase the capacity of the remaining Kure's blast furnace, but now switched to suspending both.

Nippon Steel had also decided to shut down one blast furnace in Kitakyushu at the end of March 2021. The domestic production capacity of the Nippon Steel Group was expected to decrease by about 10% from the current 54 million tons.

The Kure Works was built in 1951 on the site of the Kure Navy Arsenal. The company was operated by its subsidiary, Nippon Steel Nisshin Co., Ltd. to manufacture high-performance steel products etc. for automobiles. The scale was small compared to other steelworks in the group, and the closure of the entire steelworks would be considered.

Nippon Steel might consider relocating about 1,000 employees when closing Kure. It could affect the employment of more than 3000 people, including partner companies. If the steelworks with blast furnaces were completely closed, this was considered to be the first time for the Nippon Steel Group since its inception.

The business environment in the steel industry was rapidly deteriorating. Due to the economic slowdown caused by the U.S.-China trade war, demand for steel products, mainly in the manufacturing industry such as automobiles, decreased. China, the largest producer, might continue to increase iron production at record-breaking pace with government stimulus measures. While raw materials prices, such as iron ore, remained high, with a continuing sluggish steel market, it was facing a double hardship.

The Chinese moved to expand investment abroad. According to the Japan Iron and Steel Federation, among the Southeast Asian Nations (ASEAN) in the coming years, Chinese companies had plans to increase capacity by over 50 million tons. In the UK, a Chinese company would buy the former state-run British Steel, which had gone bankrupt. There remained a possibility that competition for increasing production might recur.

Until now, Japanese blast furnace big companies had compensated for small domestic demand with exports to maintain domestic production capacity. The export ratio of production reached about 40%. Currently, local manufacturers in Southeast Asia and India were also growing and competition was fierce.

Japan's crude steel production in 2019 fell below 100 million tons for the first time in 10 years. The crude steel production capacity of individual domestic company was said to be about 130 million tons, with about 30% excess capacity.

Nippon Steel's earnings were deteriorating. The consolidated business profit (international accounting standards) for the fiscal year ending March 2020 was expected to decrease by 70% year on year to reach 100 billion yen. It was judged that a further deterioration would be unavoidable if structural reforms were not being put forward and to decide on drastically reducing production capacity. The steel materials supplied by Kure to automakers and others, in the future, would be discussed with customers to seek response regarding supplying them from other steel mills of Nippon Steel.

In Japan, other steel giants, such as JFE Holdings, were facing similar overcapacity. Domestic steel giants gave strengths to the automotive and other manufacturing industries. They had exported semi-finished products produced at steelworks that were equipped with everything from blast furnaces to rolling equipment; and in overseas, supplied them to Japanese manufacturers to processed them. The slump in exports to the manufacturing industry had continued and domestic demand had not increased; it was highly likely that restructuring movements would spread throughout the industry.

Comments

              Due to the economic slowdown caused by the U.S.-China trade war, demand for steel products, mainly in the manufacturing industry such as automobiles decreased in Japan. China, the largest producer, will continue to increase iron production at record-breaking pace with government stimulus measures. I think it would not be a fair trading situation if China is unfairly subsidizing its steel industry to gain advantage in overseas market competitions. CCP unfairly subsidizes its exporting industries is one of the causes for the current US-China trade conflicts.