Nippon Steel Corp., Japan's largest steel company, is accelerating the reorganization of its overseas production bases.
In the United States, the company plans to sell aging automotive steel plants to join a project that is building electric furnaces with low carbon dioxide emissions.
In India, where the company already has a presence, it is considering acquiring or building new steelworks.
Both of the automotive steel plants the company wants to sell in the United States are in the state of Indiana and have been operating for about 30 years. Nippon Steel is expected to sell its 50% stake in one and 40% stake in the other to Cleveland-Cliffs Inc., a U.S. steel company.
It plans to obtain the steel these plants currently sell to Japanese automakers and others from a joint venture plant in Alabama between Nippon Steel and Luxembourg-based ArcelorMittal, the world's largest steelmaker. They plan to spend tens of billions of yen to build cutting-edge furnaces to meet demand in the United States.
These electric furnaces would use electricity to melt scrap iron to create the raw material for steel.
The electric furnaces are said to produce less carbon dioxide than blast furnaces that burn coal and other fuels to heat iron ore. Though high electricity costs are a drawback, it is easier to raise or lower production in response to fluctuations in demand.
-- Competing with China
Nippon Steel's production facilities in Japan and overseas are aging. Some have been operating for more than 50 years.
Struggling to compete with the new equipment of fast-growing Chinese companies, the company is steadily updating its facilities.
Concerned about technology leaks, Nippon Steel has been slow to expand overseas, but as Japanese automakers move their production bases abroad, the company has eliminated production bases in Japan in favor of emerging economies such as India and in Southeast Asia.
Another factor is that the new coronavirus pandemic has depressed domestic steel demand.
Nippon Steel has already decided to close its Setouchi Works Kure Area plant in Kure, Hiroshima Prefecture, but President Eiji Hashimoto said in an interview in September that "measures to address [lower demand] need to be moved forward or added." This indicates further consolidation is coming.
In the fiscal year ending in March 2020, Nippon Steel experienced a net loss of 431.5 billion yen.
While it still retains a technological advantage over its Chinese competitors, this gap is closing rapidly. The company wants to revamp its production facilities and restore its business performance while it still has room to maneuver.
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