Nippon Steel & Sumitomo Metal Corp. is set to face the challenge of cutting costs further in the second year of its establishment.
The nation’s leading steel-maker has promoted cost reductions by reviewing its production structure since it was created through the merger of Nippon Steel Corp. and Sumitomo Metal Industries Ltd. on Oct. 1 last year.
The company has also been able to improve profitability, which had been weaker compared with foreign rivals, partly thanks to the yen’s fall.
“We have made a very good start,” Nippon Steel & Sumitomo Metal President Hiroshi Tonomo stressed.
Collaboration among the company’s 16 steelworks in Japan has helped boost operational efficiency. Advanced steel production technologies owned by the two former companies are increasingly being used in an effective manner.
A plan is under study, for example, to transfer Nippon Steel’s technology to produce steel from cheap low-quality coking coal to Sumitomo Metal’s Kashima works in Ibaraki Prefecture.
The step is part of Nippon Steel & Sumitomo Metal’s efforts to reduce materials costs that account for more than 50 percent of steel production costs.
Through these measures, the company will aim to generate merger benefits worth more than ¥200 billion by fiscal 2015.
Still, competition with Chinese and South Korean steel-makers remains tough and Nippon Steel & Sumitomo Metal needs to become the world’s No. 1 in terms of cost competitiveness in the industry to have an edge over foreign rivals, said Kazuhiro Harada at SMBC Nikko Securities Inc.