The Nippon Steel Corp of Japan is set to boost its operations abroad, especially in the fast-growing country of India, to bypass the growing nationalism and capitalise on growth overseas as it faces declining demand at home.
Eiji Hashimoto, the new president of Nippon Steel, stated: “India is the fastest-growing market in the world and our investment on Essar’s operations will be our key project for this year.”
The creditors of Essar Steel India approved a joint offer that was made by Nippon Steel and ArcelorMittal for the debt-laden asset last October, and the two have drawn up the plans to double output of the unit in the coming years.
Earlier this month, Hashimoto told reporters: “It’s a big investment, but this deal was a bargain.”
The deal also gives Nippon Steel the access to a nation that is considered to be difficult for foreign firms to enter amid a “Make in India” policy and that has usually implemented safeguard duties on steel imports.
From the 1st of April this year, the Hashimoto, who is 63 years old and with extensive overseas experience, will take the helm of the third-biggest steelmaker in the world, which changed its name from Nippon Steel & Sumitomo Metal Corp.
He stated: “The change reflects our commitment to growing globally and winning global competition as a Japan-born company.” He added that the firm aims to regain and maintain it previous No.1 status by market capitalisation.
Intermittently, Nippon Steel was the No.1 in thge world by market cap between the period of 2013 and 2016, however, its market cap currently stand at $16.8 billion. According to data on Refinitiv Eikon, it lags behind peers Baoshan Iron & Steel at $23.4 billion, ArcelorMittal at $20.3 billion, Posco at $19.4 billion and Nucor at $17.5 billion,
The 69-year-old steel firm is also feeling the threat of Chinese rivals as they upgrade and improve their technology.
He stated: “China, which makes half of global steel, is a big threat. We need to keep improving our products and cost competitiveness.”
Nippon Steel has aggressively made overseas investments in the past several years, including its acquisition of Sweden’s Ovako, which makes speciality steel used in industries, in 2018.
However, some analysts say that the more urgent challenge for Nippon Steel is to come up with a fix for the problems at its domestic plants.
An analyst at Nomura Securities, Yuji Matsumoto, stated: “Production overhaul is more pressing issue.”
Last month, the steelmaker lowered its annual profit forecast for the year ending on the 31st of March by 6 percent, as technical difficulties at its mills cut its crude steel output.
Hashimoto said that ageing facilities and a lack of skilled labour were considered as the causes of the problems and one of his priorities is to tackle these issues.
He stated: “We need to raise our production capability as stable output is our base for global competition and higher profits.”
Steelmakers in Japan are enjoying solid domestic demand from automakers and the construction sector, which is bombarded with projects for the Tokyo Olympics scheduled next year, however, natural disasters and a series of glitches have hindered them from producing as much steel as they had planned.