JFE Steel to Build Up Upstream Businesses in Southeast Asia

Mr. Eiji Hayashida, president of JFE Steel, met Japan Metal Bulletin after an annual meeting of World Steel Association (WSA) in Paris and explained about JFE Steel Group’s overseas business strategy. Mr. Hayashida gave a personal view that WSA’s world steel demand forecast seemed slightly optimistic since European demand might worsen due to weak economy while Chinese steel demand keeps firm. He said Japanese and offshore steel makers are paying much attention to economic conditions of Europe and the U.S.A.

As for raw material problems, Mr. Hayashida pointed out WSA’s support will be regulated due to anti-trust system while each maker has advanced technology development based on CO2 emission control. He analyzed current trend seems shifting to utilization of cheaper raw materials. He explained JFE Steel has currently focused on fixing raw material cost, for instance, 30% covered by self-invest assets.

Mr. Hayashida said Japanese enterprises including JFE Steel must accelerate overseas deployment when yen exchange rate maintains extremely strong. He told Japanese domestic “de-industrialization” actually progresses in some industries, mainly for exporting businesses. Japanese steel makers should protect employment and build up production bases at overseas to secure profit-earning opportunities, he said.

Mr. Hayashida referred to impairment loss related to JSW Steel. He emphasized JFE Steel’s basic stance doesn’t change to keep strategic partnership with JSW Steel. He said JSW Steel is recovering production gradually and expected to enter full operation in mid October. Meanwhile, Mr. Hayashida explained JFE Steel Group’s production bases in Thailand haven’t been damaged by flood but supply chain of automobile may be affected.

Mr. Hayashida showed brief vision of JFE Steel’s next medium term management plan and said the main theme should be overseas businesses. He said JFE Steel cautiously watches integration of Nippon Steel and Sumitomo Metal Industries to keep its position despite of smaller enterprise size than the newly merged company. He explained JFE Steel doesn’t increase domestic production capacity at 33 million tonnes per year in Japan while improve productivity deeply.

Mr. Hayashida suggested JFE Steel mainly eyes Asian steel market. As for Brazilian business, JFE Steel will participate in Dongkuk Steel’ s project, he said. Meanwhile, he gave an overlook that the actual business circumstances are not easy in Asian countries. JFE Steel has carried out feasibility study fir an iron works with blast furnaces in Thailand but the FS has not progressed well. He indicated business condition is also difficult in Vietnam due to inflation. He also suggested JFE Steel examines iron works construction in the Philippines as a part of the eastern area of Malay Peninsula.

Mr. Hayashida said JFE Steel seeks possibility to construct iron works in Southeast Asia when Vale is starting raw material bases in Malaysia. He said iron works can deliver steel products and purchase raw materials in Southeast Asia along regional economic development.