JFE Steel to Expand China Steel Business

JFE Steel tries to expand Chinese business under new 3-year plan through fiscal 2014 ending March 2015. JFE Consulting (Shanghai)’s president Soichiro Oda said to a reporter of Japan Metal Bulletin the firm tries to develop Chinese market to secure high grade users including supply for appliances, shipbuilders and construction machinery makers. The firm tries to meet growing demand for high grade steel when Chinese users reorganize the production lines into automation and continuous processes due to 15-20% annualized increase for labor cost.

Mr. Oda said JFE Steel exports more than 2 million tonnes per years of steel export to China including supply for the affiliates and the volume increases every year. He said Chinese users need higher grade steel more for the modernized process along with higher grade finished products. He said the firm improves the services including delivery and quality control.

Mr. Oda said the firm tries to increase Chinese local production to meet growing demand from the automobile users. He said the firm seeks new partners to provide JFE brand of products. He said the firm launched joint venture with Suzhou HeSheng Special Material to make pre-coated metal sheet. He said JFE Steel seeks growth in Chinese market after the firm launched No.2 galvanizing line at Guangzhou JFE Steel Sheet (GJSS) and JFE Container launched No.3 plant.

Mr. Oda said Chinese automobile production increased by 1% to second monthly high of 1.84 million units in March from a year earlier while the production decreased by 3.3% in January-March from same period of 2011. He said JFE Steel shifts the production of automotive flat steel for China into GJSS and the demand is firm.

Mr. Oda said China Association of Automobile Manufacturers expects 5-10% higher production in 2012 from 2011. He said Chinese steel production increases due to higher demand for construction under easing financial condition when People’s Bank of China reduced reserve rate in November 2011 and February 2012.

Mr. Oda said Chinese steel makers’ over production is serious when the production is annualized 700 million tonnes at daily 2 million tonnes pace in March and April. He said the makers cannot increase the steel price due to the over production while many makers posted loss in January-March. He said the firm expects higher Chinese market price when JFE Steel’s selling price is higher in Southeast Asia in April-June than January-March.

Mr. Oda said Chinese apparent steel consumption is expected to increase by 4% in 2012 from 2011. He said Chinese overcapacity gets narrower if the demand increases by annual 30-50 million tonnes when the old facilities decrease gradually.