How FY20 proved to be a Bad Year for Japan's Nippon Steel due to Unintended Plant Stoppages?

While the global steel industry is suffering due to softening demand and elevated input prices, Japan's largest integrated steel maker, Nippon Steel is dealing with the additional impact of production loss due to plant shutdowns during the fiscal year 2019-20 (Apr'19-Mar'20).

The company has confirmed that it expects to lose about 400,000 tonne of crude steel production in fiscal 2019 as a result of stoppages this year at its plants at Kimitsu Works near Tokyo, and Nippon Steel Nisshin's Kure Works in Hiroshima.

The production at No.1 steelmaking plant with 150,000 tonne per year capacity at Kimitsu was suspended after a chimney at its gas-treating facility collapsed due to Typhoon Faxai, which hit eastern Japan on 9 Sep'19, the repair of which is expected to be completed by Dec'19 and the plant could restart from 2020.

While the company has arranged for alternative productions at other works such as Muroran Works, Kashima Works, Yawata Works and Wakayama Works, it is unlikely that the support from these companies would recover all the production losses incurred. The production loss in terms of finished steel is estimated to be around 340,000 tonne.

Nippon Steel also forecast the loss from the stoppage of Kure No.2 steelmaking plant at its subsidiary Nippon Steel Nisshin to reach 100,000 tonne over the same period. Nisshin's Kure No.2 steelmaking plant has been closed due to a fire which occurred on August 30 and the company expects that it would be difficult to restart before the end of current fiscal year.

The company has estimated that the total production loss from Nisshin is expected to reach 450,000 tonne but Nippon Steel would cover 280,000 tonne for Nisshin, and 70,000 tonne of stocks could be used, so the total loss would be around 100,000 tonne.

Meanwhile, the company expected the business impact loss which includes both volume loss and cost loss from Kimitsu Steelmaking stoppage to reach Yen 25 billion (USD 229.23 million), and those for Nisshin's Kure to be Yen 15 billion.