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Nippon Steel to halt 2 blast furnaces as glut spurs 10% capacity cut

Global industry races to reduce around 400m tons worth of excess capacity

Nippon Steel intends to suspend both blast furnaces at this plant in Kure, Hiroshima Prefecture.

TOKYO -- Nippon Steel intends to freeze both blast furnaces at its plant in Kure, in western Japan's Hiroshima Prefecture, as part of a plan to reduce domestic production capacity by 10%.

With a global supply glut dragging on, Japan's largest steelmaker is also weighing the possibility of closing the plant altogether, including its steel plate production lines, according to sources close to the company.

The move comes as steelmakers struggle against a wave of protectionism as well as swelling output from Chinese rivals that are competing for orders across Asia.

Nippon Steel plans to officially announce the suspension plan as early as Feb. 7, and implement it within the next few years. The company initially planned to halt just one of the two blast furnaces at Kure, but has opted to stop both. The factory's crude steel output totaled 2.73 million tons for the year ended March 2019, with its capacity accounting for 7% of the group's total.

In addition to the Kure suspension, Nippon Steel has a separate plan to halt another furnace at a plant in Kitakyushu at the end of March 2021. Together, the moves would reduce the group's current domestic production capacity of 54 million tons by around 10%.

Globally, industrywide crude steel output totaled 1.87 billion tons in 2019, according to the World Steel Association. But the world's steelmakers had combined production capacity exceeding that figure by roughly 400 million tons in 2018, the Organization for Economic Cooperation and Development estimates.

The excess alone is four times Japan's crude steel output.

Although the surplus capacity is less than the 700 million tons seen in 2015, it remains about double the figure through 2007. The glut could lead to a spate of closures of less competitive steelworks.

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