Japanese Steel Makers Drive up Overseas Investments and Operations

Japanese manufacturing industry is embarrassed by Japan Earthquake directly and indirectly. Directly supply chains were attacked by the mega earthquake and indirectly electric power supply became regulated after the atomic power plant accident. Electric power shortage is recently spreading to West Japan due to Japanese government’ s vague energy policy. Meanwhile, yen exchange rate maintains below 80 yen per US dollar. Consequently Japanese manufacturing industry is driving up overseas operations with no exception for steel industry.

One manager of Japanese major trading house, which manages an industrial estate in Thailand, showed a surprise on steep increase of Japanese enterprises in the industrial estate. According to the Board of Investment of Thailand, investment applications by Japanese enterprises increased by 70% in value for January-March 2011 from the same period of 2010 and increased by 80% in number. The value increased by 16.6% and the number doubled compared with the previous quarter. According to JETRO, Japanese direct investment expanded by 3.3 times in ASEAN 10 countries and by 2.6 times in China for January-March 2011 from the same period of 2010.

Japanese steel users are promoting overseas businesses in quest of the growing markets. Japanese automakers’ production increased by 30.3% to 13.18 million sets at overseas in 2010 from 2009 while increased by 21.3% to 9.63 million sets in Japan. Japanese steel export hit the record high volume at 43 million tonnes in 2010 despite of strong yen trend when Japanese steel industry weighted heavily correspondence for Japanese steel users. In 2011, the steel export maintains high level despite of increasing Chinese steel export and lowering market price.

Japanese steel users are strongly requesting local material supply to Japanese steel makers since the users are under severe competitions with not only American and European manufactures but Chinese and South Korean manufactures. Nippon Steel and JFE Steel decided establishment of continuous hot dipped galvanizing steel sheet lines (CGLs) in Thailand and built up CGLs in China currently. They are shifting to local steel production from export.

The surroundings accelerate Japanese manufacturing industry’ s outflow to overseas, that is, negative growth of domestic demand, heavy tax system and energy cost upsurge. Japanese government requested electricity conservation to the consumers around Osaka by more than 10% on and after July 25 since Kansai Electric Power cannot restart operations of atomic power plants. Electricity saving has already been implemented in the service areas of Tohoku Electric Power and Tokyo Electric Power.

If Renewable Energy Total Buy Back System was approved in Diet, the system would make heavy impact on electric power intensive industries including electric furnace steel makers. Japan iron & Steel Federation recently pointed out they are suffered from “four troubles” those which are higher corporate tax than in other countries, delayed participation in Trans-Pacific Strategic Economic Partnership, overmuch CO2 emission reducing target and too high yen exchange rate.

Strong yen trend stimulates Japanese steel makers’ and trading houses’ investment at overseas. This financial year may become a turn-around point for Japanese steel industry.