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By Yuka Obayashi
TOKYO (Reuters) – Japan's Nippon Steel Corp. will beef up its overseas operations, particularly in high-growth India, to bypbad growing nationalism and take advantage of international growth, confronted the contraction of demand in the internal market.
"India is the world's fastest growing market and our investment in Essar's operations will be our key project for this year," said Nippon Steel's new president, Eiji Hashimoto.
The creditors of Essar Steel India approved in October a joint offer from ArcelorMittal and Nippon Steel for the debt loader. Both countries have developed a plan to double unit production in the coming years.
"It's a big investment, but it was a good deal," Hashimoto told reporters in March. This agreement also gives Nippon Steel access to a country that is difficult to penetrate for foreign companies as part of a "Make in India" policy and has often put in place safeguard duties on steel imports. .
Since the 1st of April this year, Hashimoto, 63 years old – strong of an experience abroad – took the reins of the third largest steelmaker in the world, who changed his name and became one of the best now calls Nippon Steel & Sumitomo Metal Corp.
"The change reflects our desire to grow globally and win global competition as a Japanese-born company," he said, adding that he wanted to regain and retain his previous number-one status by market capitalization.
Between 2013 and 2016, Nippon Steel was the world's largest market cap in the world, but its market capitalization now stands at $ 16.8 billion, behind Baoshan Iron & Steel at $ 23.4 billion, and ArcelorMittal at $ 20.4 billion. , $ 3 billion, Posco at $ 19.4 billion and Nucor at $ 17.5 billion. billion, according to data on Refinitiv Eikon.
(Chart – Market capitalization of major steel producers, https://tmsnrt.rs/2VagS8s)
The 69-year-old steelmaker is also threatened by Chinese rivals who are upgrading and modernizing their technology.
"China, which produces half of the world's steel, is a serious threat, and we must continue to improve our products and cost competitiveness," he said.
Nippon Steel has aggressively invested abroad in recent years, including the acquisition in 2018 of the Swedish company Ovako, which manufactures specialty steel used in industries.
Some badysts believe, however, that the most urgent challenge for Nippon Steel is to solve the problems of its domestic plants.
"Redesigning production is a more urgent problem," said Yuji Matsumoto, an badyst at Nomura Securities.
In February, the steelmaker cut its annual profit forecast by 6% for the year ended March 31, as technical problems at its mills reduced crude steel production.
Hashimoto said that the aging of its facilities and the lack of skilled labor were at the root of these problems, and one of its priorities is to tackle these issues. problems.
"We need to increase our production capacity because stable production is our basis for global competition and higher profits."
Japanese steelmakers benefit from solid domestic demand from carmakers and the construction sector, which is working on projects for the Tokyo 2020 Olympic Games, but natural disasters and a series of problems have prevented from producing as much steel as they had planned.
(Report by Yuka Obayashi, edited by Tom Hogue)
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