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Made in Thailand: Japan-quality steel

Nippon Steel and Sumitomo Metal has been promoting an international set of standards for managing production at this Thai steel sheet plant.

TOKYO -- Japanese steel plants in Thailand have made tremendous strides. Just ask the automakers that buy steel sheet from them. It's topnotch stuff.

In fact, the plants have raised the quality of their sheet so much that they seem impervious to competition from other Thai plants or from global steel powers.

Japanese companies' steel plants in the country are even defying the global steel glut.

What is even more notable about these plants is that Thais occupy most of the key quality control and management positions.

The Nikkei recently visited a plant that makes steel sheet for cars operated by NS-Siam United Steel, or NS-SUS, the Thai unit of Nippon Steel and Sumitomo Metal. While there, we listened in as a Thai employee explained key quality control points to some visiting Indonesian workers.

The Indonesians were at the plant, located in the central province of Rayong, to learn how to maintain and repair cold-rolling and galvanizing equipment. They are expected to be part of the original workforce at a new steel sheet plant the Japanese steelmaker plans to start operating in Indonesia next year.

Making steel products for cars requires cutting-edge technology and high-level production skills. Thai workers now have the same level of skills and expertise as their Japanese counterparts and can serve as competent quality control instructors, according to Hiroaki Sato, president of NS-SUS.

Getting to this point was not a smooth ride. The facility used to be plagued by quality and delivery problems and deluged by complaints from automakers, its main customers.

Quality standards are especially high for door panels and other external body panels. The surfaces of the rolls used to make these panels must be perfectly smooth. This must be ensured by rigorous checks using specialized jigs or visual inspections.

In the past, workers at the plant only responded to problems found on finished products, such as scratches on steel panels.

When zinc is applied to steel sheet as a protective coating to prevent rusting, a pneumatic system is used to prevent the zinc from dispersing in a spray. But the system can only be controlled with subtle adjustments.

Time and time again, the plant could not make these sophisticated modifications. Now, the systems are adjusted effectively -- in advance -- according to production and process management plans. As a result, yields have improved substantially.

Thai workers can now anticipate what will happen next, said Bantoon Juicharean, vice president of NS-SUS.

This year, the plant began supplying super-high-tensile steel sheet to Japanese carmakers. Such ultrahigh-tensile steel is nearly twice as strong as ordinary high-tensile steel and 15% lighter.

The Thai plant can match or even beat similar Japanese facilities in terms of quality, delivery time and rejection rate, according to Sato.

NS-SUS's efforts to boost its performance have been driven by international production management standards focused on work process improvement and equipment maintenance. These standards, held over the entire workforce, are known as TPM.

NS-SUS has been making fully integrated, all-out efforts to promote TPM in its operations. The plant's management has vigorously scrutinized both costs and losses concerning the "Four Ms" -- men, machines, methods and materials -- and taken every step to cut back wherever possible.

It has standardized operations and equipment management with a focus on the Four Ms and required workers to strictly observe the standards.

The efforts have paid off in a six-point rise in the yield rate during the past 10 years. The plant has also managed to avoid lost work time due to accident for 11 consecutive years -- a feat that would put a Japanese plant to shame.

Global demand for steel will grow in 2016 for the first time in two years. But spillover from China, where the steel industry has a capacity glut, is putting strong downward pressure on prices.

This tough global environment is barely affecting the Japanese steel plants in Southeast Asia that make sheet for cars.

Nippon Steel and Sumitomo Metal and JFE Steel,a unit of JFE holdings, are the only foreign steelmakers operating in the region. There is little room for Western or Chinese producers to open shop, at least not competitively.

Meanwhile, there aren't even any profit opportunities in Thailand for Sahaviriya Steel Industries, the country's largest steelmaker, said Wikrom Vajragupta, chairman of the Thai Iron and Steel Club of the Federation of Thai Industries.

This is because Japanese automakers and steelmakers jointly develop new steel products for cars.

A similar situation exists in Indonesia. It will be some time before state-owned giant Krakatau Steel can begin full-scale production of steel products for cars, according to Gusti Putu Suryawirawan, director for base metal industries at Indonesia's Industry Ministry.

Steel demand in the six major members of Southeast Asia's trade bloc, known as ASEAN, keeps growing despite the global slump.

Indonesia, Thailand, Malaysia, the Philippines, Vietnam and Singapore consumed 68 million tons of steel in 2015, up 3% from the previous year. This stands in sharp contrast to a 3% decline in global steel consumption.

In addition to car production picking up, demand related to infrastructure and urban development remains strong in Southeast Asia.

Back to Thailand: At JFE Steel Galvanizing (Thailand), or JSGT, a unit of JFE Steel, all department chief posts, including those responsible for quality control and accounting, will be occupied by Thais by 2018, according to Managing Director Mitsuru Ogawa.

JFE began making steel sheet for cars in Thailand for the first time three years ago.

JSGT supplies steel sheet to nine Japanese and foreign carmakers, including Toyota Motor and Suzuki Motor. Its Thai employees handle all sales operations except price negotiations.

The plant's Thai employees can discuss and solve product problems that Thai engineers at the automakers it supplies might have, Ogawa said.

JSGT's sales squad has also become accustomed to Japanese style after-sales services. These mostly consist of representatives making regular visits to clients to offer technical support.

One more piece of evidence: At the final product inspection stage, Thai workers are able to detect scratches only 1 millimeter long. Koji Matsubayashi, a production manager at JSGT, says it's no sweat for Thais to take charge of this stage.

JFE Steel's first plant making steel sheet for cars in Indonesia came on stream in September. The plant's workforce got its know-how from JSGT. A total of 70 workers at the Indonesian plant have visited the Thai plant to learn about maintaining equipment and managing operations.

If these workers hone their skills even more, Southeast Asians will soon be training one another. "I hope," Ogawa said, "this will lead to a culture of friendly competition" among Southeast Asian employees.

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