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Business

Nippon Steel leaves door open to integrated Asian mills

President stresses profit over scale, doubles down on specialization

Nippon Steel's Kashima works in Ibaraki Prefecture.

TOKYO -- Nippon Steel & Sumitomo Metal will consider building integrated blast furnace steelworks in Asia if governments request it, President Kosei Shindo told The Nikkei, a step back from previous statements that the steelmaker would avoid such projects.

Shindo also addressed the successes and challenges of the merger that created the Japanese company five years ago Sunday, as well as how the steelmaker will navigate a global realignment driven by the rapid ascent of Chinese competition. Excerpts from the interview follow.

Q: How would you rate the merger?

A: We've shut down one blast furnace at the Kimitsu works and 14 downstream processing lines at four sites, including the Kashima works. The integration work is largely complete. [Our earnings] will improve by a total of around 400 billion yen ($3.55 billion) a year.

But there were three things we couldn't predict. One was the drop in crude oil prices. Profits have worsened in the steel pipe business, a strong point of the former Sumitomo Metal Industries. Materials prices have surged, and we've been slow to pass that on to customers. And excessive production by Chinese players has hurt [steel] prices. Our pretax profit margin has fallen far short of our 10% target.

Nippon Steel President Kosei Shindo

Q: Will you maintain the 10% target?

A: I don't think it'll be difficult. The situation in China is changing. [The steel industry there] is pushing forward with government-led scrapping of excess capacity.

Q: Nippon Steel has dropped from second to fourth in the world in terms of crude steel production.

A: We're not just pursuing scale. I want to make this a company that can keep generating some amount of profit.

Q: What are your plans for your overseas operations?

A: I've said that in principle we won't build integrated blast furnace steelworks, which start with melting iron ore, but we could get government requests to build them in Asia. We'll flexibly consider partnering with local companies to participate in blast furnace construction.

Q: Aluminum and carbon fiber are becoming more widely used.

A: I don't expect those to become major materials. Automobile production in emerging markets will keep growing going forward. I don't see steel demand dropping much. Our basic thinking is to excel in steel without diversifying our business.

(Nikkei)

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