METI to Encourage Consolidation of Electric Furnace Steels

Ministry of Economy, Trade and Industry supports consolidation of electric furnace steel makers in Japan when the makers’ cost would increase under new laws for counteractions to global warming. Masanori Suzuki, director general of Manufacturing Industries Bureau said to porters electric furnace steel makers are indispensable for Japanese economy but they should consider future vision including scale and business model for future growth. METI already requested Japan Fair Trade Commission to revise competition policy under globalizing market. METI tries to improve competition base for manufacturers by amending related laws for lower corporate tax and better condition.

Mr. Suzuki said to reporters on Tuesday METI expects business condition would be severer for electric furnace steel makers due to proposed actions for counter actions for global warming including global warming tax, renewable energy buy back system and emissions trading system. He said companies should consolidate in some industries while METI tries to encourage consolidation for competitive industries. He said METI supports Japanese manufacturers consolidate into optimum numbers of players, which should be decided by conditions of each industry to compete with offshore rivals.

Japanese electric furnace carbon steel makers suffer from low operation rate due to slower construction demand in Japan. The makers’ competitiveness gets weak compared with offshore rivals when steel makers get larger in South Korea and China.

Japan Iron and Steel Federation expects electric furnace steel makers would pay environmental related tax and cost for renewable energy at 30-60% of recurring profit due to the heavy electricity usage. The federation warns government should support the makers to develop new technology and to invest efficient facilities. METI tries to find better environmental solutions not to damage economy growth through consultation with private sector.

METI tires to remove hurdles for consolidation in each industry. Mr. Suzuki said METI requested Japan Fair Trade Commission to revise the competition policy to encourage better international competitiveness for Japanese private companies. METI targets to reduce corporate tax by 5 percentage points in fiscal 2011 starting April 2011. METI tries to improve the fundamentals for manufacturers’ international competition encouraging domestic investment.