METI Warns 15% Higher Steel Cost without Nuclear Plant

Ministry of Economy, Trade and Industry warned Japanese steel products making cost would increase by 15% compared with 2005 level if the government would terminate all nuclear power plant and shift all the power generation to thermal power plant while the government is cautious on nuclear power plants operation after the accident at Fukushima Daiichi nuclear power plant. METI submitted the study results with more than 3 trillion yen higher cost caused by the shift to thermal plant to the administration’s meeting on growth policy on Friday. METI warns Japanese industry could accelerate the operation shift to low cost foreign sites when the power shift would increase the nationwide industry’s production cost by 7.7 trillion yen in the industry value chain.

The ministry expects the production cost increases by 28% for nonferrous metals products, by 15% for metal products, by 40% for plastic products and by 36% for textile products. The unstable power supply could encourage Japanese manufacturers to shift the operation to other countries.

Japanese electric furnace steel makers and other power consuming industries would suffer from higher power cost if the government would start new renewable energy scheme, under which manufactures have to purchase the energy at fixed price. Japan Iron and Steel Federation warns with the new scheme, Japanese electric furnace steel makers’ recurring profit would decrease by 13-42% compared with 20-year averaged profit. Such higher cost would encourage Japanese manufacturers to shift the operation to other countries.

The government indicated at the meeting nuclear power plants can restart if the safety is secured and the industry can have own power generation plant. The government will support the industry’s better competitiveness through various options including lowering the higher corporate tax to other major countries’ level, wider economy partnership agreements and suitable regulation on corporate sites. The government has to persuade the industry to accept the high cost new energy policy by providing additional support to secure international competitiveness of steel and other manufacturers.