In the current challenging geopolitical times local production and local consumption is becoming more prominent as globalisation takes a back seat. AME expects Japan’s crude steel production for 2022 and 2023 to be 100Mt, up 3.9% and 101Mt, up 0.9%, respectively year on year. Beyond 2024 AME expects crude steel production to remain flat at 101Mt with a zero-growth rate for the foreseeable future.   

Nippon Steel

Nippon Steel announced its medium to long-term plans in September 2020 to reach a total of 100Mt of crude steel capacity, from its current capacity of 70Mt (54Mt domestic and 16Mt overseas). The company plans to expand in India, the US and Southeast Asian countries. Two key strategies of Nippon Steel include to rebuild its domestic steel business and to deepen and expand its overseas business.

Rebuilding its domestic steel business includes reducing the number of blast furnaces from 15 to 10, equivalent to 10Mt of crude steel capacity or 20% of production. The key aim is to build a sustainable and resilient profit structure and to improve labour productivity. The structural reform is expected to reduce costs (mainly fixed costs) by US$1.364bn per year and the entire structural reform is planned for completion by fiscal year 2025 (ending March 2026).

Nippon Steel will also improve its product mix by having high value-added steel products, intended to improve the average marginal profit. These will include ultra-high-tensile steel sheets (=/>1.0 GPa) for use in the automotive industry and be implement at Nagoya Works.

Nippon Steel will also increase its investment in high-end electrical steel sheets for both grain-oriented (GO) and non-oriented (NO) as the world rapidly shifts towards decarbonisation. GO electrical steel sheets demand will growth as stricter regulations on the global energy efficiency of transformers and increasing power demand from growing emerging countries.

Demand for NO electrical steel sheets used in the iron core of electric vehicles is expected to increase rapidly as government policies surrounding EV’s are implemented. The high-end electrical steel sheets are beginning produced at Setouchi Works and Kyushu Works. Further capacity at Setouchi Works is expected by mid-2024.

In India, ArcelorMittal and Nippon Steel India (AM/NS India) will be expanding capacity with a focus on integrated steelmaking business, with plans to construct a second steel mill. For growing southeast Asian countries Nippon Steel will target growth via equity participation (brownfield investment) in integrated steel mills.

In December 2021, AM/NS India was granted approval from Odisha government for land use for a new integrated steel mill in Kendrapara. In January 2022, AM/NS India signed a Memorandum of Understanding (MoU) on investment project in Hazira Works. The MoU includes expansion of steel making capacity, new coke ovens expansion of new and existing captive port facilities, and renewable power generation.

AM/NS Calvert has plans for a new EAF to be completed by June 2023, which will increase crude steel production by 1.5Mt for an investment of US$780m. Construction commenced in February 2021 with new capacity producing steel slabs for AM/NS Calvert’s hot strip mill operations. The company will produce high-value added products for the automotive industry including third generation ultra-high-tensile steel sheets (980 MPa or more) and Interstitial Free (IF) steel for automotive exterior panels.  

JFE Steel

JFE Steel is planning to shut down its upstream and hot rolling facilities at Keihin Works by March 2024 (FY2023). This will result in a reduced crude steel capacity of around 6Mt. In its medium-term business plan (FY2021 to FY2024) the company is also transitioning from ‘quantity to quality’.

This means cost reductions of US$1.1bn over four years, to increase the per-ton profit from fixed cost reduction. The company is also planning for labour productive to increase by 20% via structural reform utilising state-of-the-art digital equipment modernisation. The total number of employees is expected to decline from 16k to 13k.

JFE Steel is also planning to increase its mix of high valued-added steel products to 50%. Specific product mix enhancements include increase non-oriented electrical steel sheet production capacity, increase capacity for heavy, extra-thick steel plate for offshore wind-power applications, and production of high-tensile steel sheet for automotive sector.

JFE also has a long-term strategy to grow its overseas operations. The company has a 5% ownership in Vietnam’s Formosa Ha Tinh, which currently has a crude steel capacity of 7Mt. Future plans at the facility include an expansion to 21Mt capacity, however, Covid-19 impacts have delayed these plans and the company has yet to implement any short-term strategy. At this stage, no specific timeframe has been announced publicly regarding the expansion.

Due to increasing steel demand in the Southeast Asian region AME expects upside potential increase in capacity by late 2024 with expansion to 21Mt by 2029. Other overseas investments by JFE Steel include India, China, Mexico, Indonesia, and Thailand. These investments relate to hot-dip galvanised production, specialty bar steel and grain-oriented electrical steel sheet. JFE Steel is expecting to triple its profit from its overseas operations by March 2025 from March 2021 (FY2024 to FY2020).   

Japan’s Decline in Domestic Demand

Japan’s domestic steel demand has been declining from 2017, with the exception of 2021, which was mainly due to the manufacturing sector recovering from the Covid-19 pandemic. Japan’s total order booked of ordinary finished steel products for 2021 was 43.2Mt, up 9% year on year, according to data from The Japan Iron and Steel Federation (JISF).

The construction sector is expected to remain flat as public construction projects are to be carried out over the government’s five-year National Resilience Plan. Japan’s ordinary finished steel products (order booked) for the top four regions are Kanto, Kansai, Tokai and Chogoku.

Merger & Acquisitions

In February 2022, Nippon Steel acquired G Steel and G J Steel from Kendrick Global Limited. G Steel and G J Steel are the only integrated flat steel producers in Thailand with EAF and hot strip mill facilities. Nippon Steel entered into a share purchase agreement (SPA) to acquire 49.99% and 49.9% shares in G Steel and G J Steel, respectively for an investment of US$420m. The company has also launched a tender offer for the remaining shares in G Steel G J Steel with expected investment of US$345m.

The total crude steel capacity of the EAFs operated by G and G J Steel is 3.08Mt, and their total hot strip mill capacity is 3.4Mt. The majority of steel demand in Thailand is general purpose, with civil engineering and construction accounting for 60% of the country's steel demand. Nippon’s strategic acquisition is intended to make it an insider in Thailand as a local integrated steelmaker as countries around the world shift towards protectionism.