Giant Japanese steel mill signals pandemic-recovery taking root

[TOKYO] A surge in automotive demand is making it attractive for Nippon Steel Corp to restart facilities it shut earlier this year even as the world's third-biggest steelmaker cautioned that longer-term domestic demand remains anemic and its plan to cut output by shutting ageing mills will remain on track.

In the last two weeks, Nippon has announced plans to reopen at least three more blast furnaces as demand for steel recovers. It will examine restarting more furnaces as the current capacity is still tight, Katsuhiro Miyamoto, executive vice president of the Tokyo-based company, said Thursday in an interview.

The auto industry's recovery, combined with resurgent steel prices in Asia backed by the strength of China's economy, has come as a relief for steelmakers in Japan after the pandemic squeezed already shrinking local demand. Worldwide crude steel output next year will probably return to levels seen before the pandemic, supported by China and a pickup in many other countries, Tokyo Steel Manufacturing Co. said last month.

"Even though export prices are rising, we are cutting the volume and allocating more supply to domestic customers whose demand is strong," Mr Miyamoto said in the interview. "Demand is recovering more than we anticipated," he said.

Nippon Steel said Friday it will restart a blast furnace at Kashima in Japan in late January. That follows its Nov 24 announcement on the resumption of a blast furnace in Kimitsu and another furnace in Muroran on the northern island of Hokkaido.

Despite the recent recovery, Nippon Steel won't change its plan for structural reforms by streamlining operations at its ageing domestic mills, Mr Miyamoto said. In the mid-to-long term, local demand is set to fall due to a shrinking population, while it will be difficult to keep the current export ratio of more than 40 per cent as more countries try to make steel for their own markets, he said.

Mr Miyamoto said the company could add lower-cost electric-arc furnaces, or "mini mills," in Japan, as part of its efforts to diversify raw material sources and save costs. The company could build small mills - used to make recycled steel by melting scrap - to make high-quality steel, including automotive steel sheets, in addition to the one under construction in Hirohata, western Japan, Mr Miyamoto said.

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