Japan's Nippon Steel extends its Two Plants Closure for Next Few Months

The recent typhoon in Japan and a fire outbreak has made Japan's Nippon Steel to suspend operations at its Kimitsu and Nisshin Kure plants for the upcoming months.

The two domestic plants manufacture alloy steel used in auto sector. The plants make semi-finished steel products for wheels and other moving parts. Together, they produce in total over 50% of output of such products. Nippon Steel is the largest manufacturer of automotive alloy steel in Japan.

The two suspended plants, Kimitsu, Chiba Prefecture, and subsidiary Nippon Steel Nisshin's Kure works in Hiroshima Prefecture's combined output is believed to be about 200,000 tons per month.

One of two smokestacks used for gas processing at the Kimitsu works was knocked over in typhoon Faxai in early September. At the Kure works, a fire in late August inflicted extensive damage to the control room and key parts at one of two relevant plants.

The Kimitsu plant will take up to six months, and the Kure plant as long as 10 months, to bring production back to the level before they were damaged. The plant suspensions may reduce Nippon Steel's profit by several tens of billion yen.

The company's key customer Toyota Motor has started sourcing steel from alternative sources. Another customer, tire manufacturer Bridgestone, which sources wheel-reinforcing material from Nippon Steel, has also experienced no impact on its production, but a spokesperson said the company has already arranged to purchase the material from alternative sources.

The recent trade war between the U.S. and China has softened the global steel demand for automobiles and machinery. The world's third-biggest steelmaker, Nippon Steel has been affected by the rising cost of raw materials and tensions between the U.S. and China. They have recorded a 56% decrease in business profits in this financial year. Margins are expected to slump for a while as iron ore prices have inflated to a great extent and also demand in Asia has decreased. Thus, in light of the extended period of squeezed margins, Nippon has decided to increase its prices to meet their expectations. In addition to price hikes, Nippon Steel Corp plans on increasing its productivity by better streamlining and introduction of newer technology.a