Nippon Steel president predicts low global prices to continue until at least 2020

02 January 2017

As low global steel prices caused by overproduction in China continue, Kosei Shindo, president of Nippon Steel & Sumitomo Metal Corp., predicted in a recent interview with The Yomiuri Shimbun that the situation will remain at least until 2020.

“Though the problem won’t be resolved any earlier than 2020, the Chinese government will not leave the situation unaddressed for decades,” he said.

Since around 2014, the slowdown in economic growth in China has led to huge amounts of surplus steel materials being exported by China to overseas markets, resulting in plummeting steel prices worldwide. As Chinese steelmakers have been struggling to earn a profit, the Chinese government has decided to reduce the output capacity of crude steel by up to 150 million tons by 2020.

Nippon Steel had at one time suspended operations of blast furnaces due to poor business performance while preserving its employees’ jobs, mainly through starting new business operations.

“If our experiences can be useful, we will cooperate,” Shindo said, so that Chinese steelmakers’ decrease in production will not negatively affect employment in China, suggesting that Nippon Steel’s experiences may be applicable there as well.

Meanwhile, steelmakers face a new risk that threatens to push down their profits: surging prices for coking coals that are used in steel production.

Shindo said the rise in coking coal prices will result in coal mines around the world resuming production that had been discontinued, which would then help ease the short supply of such coals.

Unless disasters or other incidents related to coal production occur, Shindo said, “the prices of coking coals will surely not rise further from the current level.”

Source – Japan News