Nippon Steel Says Risk Of Coronavirus Spreading Down

The world's No. 3 steelmaker, Nippon Steel, is gearing up to mitigate risks as the slowdown in manufacturing activity in China following the coronavirus outbreak could further affect demand in industries such as the automotive and engineering industries. Nippon Steel's executive vice president, Mr. Katsuhiro Miyamoto, told Reuters in an interview last week, “We have not cut crude steel production, but we must be prepared for a cut. Inventories held at steel mills in China increased by 30% in early February from a year ago, while inventories at the Nippon Steel joint venture in Shanghai also increased due to disruptions to transportation. We can see broader implications if industrial activity does not grow rapidly in China. ”

He added that demand for steel in automobiles, industrial equipment and shipbuilding has been affected by the softer global economy even before the outbreak.

Another concern, Miyamoto said, is the rise in raw material prices as coking coal prices come under pressure from the border closure by Mongolia, which supplies about 30% of a key steelmaking ingredient to China.

Referring to April-September, he said: "We cannot say what impact we will have on the epidemic, but we expect a difficult period in the first half of next fiscal year."

In February, Nippon Steel unveiled a plan to shut down nearly 10% of its production capacity, an unprecedented step in the once dominant Japanese steel industry, which has been hit by falling domestic demand and competition from China. The planned closure of 4 blast furnaces will reduce annual steel production by 5 million tonnes to 49 million tonnes. A record loss of 440 billion yen (US $ 4 billion) is projected for this fiscal year due to huge impairment losses on domestic businesses.