JFE Holdings mulls plan for aging plants as demand fades
2020-03-06 14:30:48 [Print]
JFE Holdings Inc., Japan's second-biggest steelmaker, is reassessing production at its aging facilities at home as domestic demand shrinks and competition intensifies overseas.
In contrast to faster growing markets such as China and India, demand in Japan is set to fall over the next 10 to 20 years as the population shrinks, Chief Financial Officer Masashi Terahata said earlier this week. The company also faces stiffer competition in Southeast Asia, its top export market, as rival mills, especially from China, step up sales of cheaper steel.
"We must look ahead and make a judgment on the optimal structure of our production facilities for the mid- to long-term," Terahata said. "We will see a drastic change in the worldwide industrial map if Chinese mills build blast furnaces in Southeast Asia as it could make Japanese steel less competitive," he said.
JFE is currently trying to estimate the pace of decline in domestic demand over the next couple of decades to determine the appropriate size of its production capacity, Terahata said, adding that the company will unveil its reorganization plans in the year starting April. It also intends to utilize or add more overseas manufacturing sites and move some production from Japan to faster-growing Asian economies to compete against foreign rivals, he said.
JFE currently ships more than 40% of its crude steel outside its home market. The plan to reorganize its facilities comes as margins are being squeezed by high production costs and low steel prices. JFE has forecast zero profit for the full-year at its steel unit, which contributes more than 60% of the company's total sales.
In contrast to faster growing markets such as China and India, demand in Japan is set to fall over the next 10 to 20 years as the population shrinks, Chief Financial Officer Masashi Terahata said earlier this week. The company also faces stiffer competition in Southeast Asia, its top export market, as rival mills, especially from China, step up sales of cheaper steel.
"We must look ahead and make a judgment on the optimal structure of our production facilities for the mid- to long-term," Terahata said. "We will see a drastic change in the worldwide industrial map if Chinese mills build blast furnaces in Southeast Asia as it could make Japanese steel less competitive," he said.
JFE is currently trying to estimate the pace of decline in domestic demand over the next couple of decades to determine the appropriate size of its production capacity, Terahata said, adding that the company will unveil its reorganization plans in the year starting April. It also intends to utilize or add more overseas manufacturing sites and move some production from Japan to faster-growing Asian economies to compete against foreign rivals, he said.
JFE currently ships more than 40% of its crude steel outside its home market. The plan to reorganize its facilities comes as margins are being squeezed by high production costs and low steel prices. JFE has forecast zero profit for the full-year at its steel unit, which contributes more than 60% of the company's total sales.
