Japan's Nippon Steel likely to Shut more Blast Furnaces amid Poor Demand

The tepid steel demand trend for almost over a year seems to have taken a toll on various steel manufacturers globally and one such manufacturer is Japanese steel mill, Nippon Steel. As per the market sources, the company may shut more blast furnaces as part of its plans to reduce domestic facilities to cut costs and also amid increased fear of plunge in profits.

If this happen then the closure of furnaces will be in addition to the two blast furnaces already been decided to shut by the company (by March 2024), out of the total count of company's fifteen furnaces in Japan. Thus, further closures could lead to significant reduction in steel-making capacity of the company in the Asian region.

Commenting on the future prospects, Nippon Steel Executive Vice President Katsuhiro Miyamoto said that the company plans to consolidate all of its facilities including blast furnaces in order to bring down fixed costs. The moves are an attempt to mirror the sharp decline in domestic steel demand and the constraints on exports on account of ongoing trade conflict among countries worldwide, he noted.

Cut in company's capital spending

In August this year, the company have also announced its plans to have 10% cut in its planned capital spending of 1.7 trillion yen (USD 16 billion) for three years through fiscal 2020, amid the steel market slump due to increased Chinese production and fallout from the U.S.-China trade war. The manufacturer had spent about 440 billion yen in fiscal 2018.

Revision of profits forecast

Last month, the steelmaker have also trimmed its annual profit forecast as slumping steel prices in Asia dented its export margins and a series of suspensions at local facilities, caused by a strong typhoon and a fire, cut its output. It also announced a restructuring plan at the time to consolidate its 16 domestic bases into six steelworks that will be under the direct control of its president from next April although details were not disclosed.

Focus on overseas market

To drive growth and offset falling local demand, Nippon Steel has been stepping up overseas expansion. Last month, India's Supreme Court cleared the path for ArcelorMittal and Nippon Steel to take over bankrupt Essar Steel, following a legal tussle that has dragged through multiple courts for over two years. The company's management noted that although the buyers' plan to double Essar's output in coming years remains unchanged, they may revise some steps to meet softer steel demand in India and sliding natural gas prices.