Japan Steel mulls overseas ventures

Bloomberg

Japan Steel Works Ltd., a nuclear parts supplier for customers from Areva SA to Hitachi Ltd., is considering tieups in Southeast Asia and India after the Fukushima disaster squeezed demand at home and in the U.S.

The company will have a tough time generating orders in the next two years, President Ikuo Sato said in Tokyo. Forging ventures to make valves, tubes and other smaller parts involved in nuclear reactor construction will help open export markets for key products, he said.

“If we’re able to form such partnerships, it will be easier to enter such markets,” Sato said. “It will be necessary for us to tie with companies” that are seeking to improve their access to technology.

Emerging markets offer a chance for growth amid growing opposition to nuclear power after the tsunami and quake prompted the closure of nearly all of Japan’s atomic stations.

Japan Steel operates the only plant in the world capable of producing the central part of a nuclear reactor’s containment vessel in a single piece, reducing the risk of a radiation leak. The company said Nov. 16 that orders for forged steel used in nuclear and thermal power plants would probably total ¥30 billion ($312 million) in the year ending March 31, 43 percent lower than levels two years ago.

“Given that it will be difficult for the company to expect demand in Japan, the key is to what extent they will be able to secure overseas projects, especially in China,” said Ryo Tazaki, an analyst at Nomura Securities Co.

The company is relying more on the segment of its business that makes industrial machinery as global demand for atomic energy declines.

Japan Steel Works expects operating profit from the division that makes steel and energy products to drop about 97 percent to ¥800 million in the year ending March 31, from ¥25 billion two years earlier, according to a Nov. 16 presentation by the company. Operating income in the machinery segment is set to surge almost fivefold to ¥15.4 billion over the two-year period, aided by demand from carmakers.

To avoid an outflow of technology, Japan Steel Works has no plan to build plants outside Japan capable of making the high-quality steel used in nuclear containment vessels, Sato said in the Wednesday interview.

Sato was head of the company’s Muroran plant on Hokkaido for five years before taking over as president in June 2009. The Fukushima meltdowns occurred just as Japan Steel Works completed an ¥80 billion expansion at Muroran in response to demand from reactor builders.