The largest steel company in Japan warned that it may have to close more power plants than expected if global demand does not recover from this year’s slump.
The plan of Nippon Steel plan to cut 20% of its capacity in Japan by 2025 could be expanded if difficult market conditions continue or even worsen, said executive vice president Takahiro Mori.
“The question is whether this is a structural problem or just linked to economic fluctuation,” he said in an interview.
The company will closely study how the market develops before taking any further decisions on mills, he said.
Steelmakers around the world face deep problems, with crises in key sectors such as automobiles and construction.
Global demand for the metallic alloy is expected to drop more than 2% this year, according to the World Steel Association.
The Organization for Economic Co-operation and Development said this week that the global economy will experience a “significant slowdown in growth” in 2023.
Steel prices skyrocketed to record highs in the first half of 2022, along with many other industrial commodities, but have since fallen.
Other major producers, including ArcelorMittal at Europeclosed plants.
The business climate will remain “difficult” for steelmakers in 2023, Mori said, and demand will be at “very low levels” until the end of the fiscal year ending in March.
If the current level of demand continues for too long, some of the company’s existing production capacity may not be needed, he said.
Nippon Steel is in the midst of a long-term restructuring to deal with slowing domestic demand and tougher competition in the Asia🇧🇷
It has already closed three blast furnaces and plans to close another one in 2025.
Eliminating excess capacity has already reduced the company’s costs and increased its bargaining power with customers, especially automakers.
“When there is excess production capacity, the seller wants to fill the idle capacity and tends to chase volume at the expense of prices,” said Mori.
“We are currently reducing capacity, so this is unlikely to happen.”
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I am an author and journalist with a focus on market news. I have worked for a global news website for the past two years, writing articles on a range of topics relating to the stock market. My work has been published in international publications and I have delivered talks at both academic institutions and business conferences around the world.