Nippon Steel's new business plan confirms its lighter Japan tread

Under its new management plan, spanning the fiscal years 2026–2030 from April next year through to March 2031, Nippon Steel aims to achieve 100 million tonnes/year or more in global crude steel production capacity "of companies in which Nippon Steel has a 30% or greater stake", it explained in an IR presentation.

Over the five years too, the company intends to make a total of Yen 6 trillion ($38.54 billion) in strategic investments, including approximately Yen 4 trillion overseas and Yen 2 trillion in Japan. The Yen 4 trillion abroad includes the $11 billion that Nippon Steel had pledged to invest in U.S. Steel Corp (by 2028) in addition to the $14.9 billion it paid for the Pittsburgh-based mill when the takeover was finally concluded in mid-June this year.

Meanwhile, by Fiscal 2030, Nippon Steel aims to record a consolidated group underlying business profit of Yen 1 trillion, of which domestic operations will contribute Yen 500 billion – lower than the forecast for the current fiscal of Yen 565 billion – and Yen 500 billion from overseas operations, more than three times the profit its overseas operations are forecast to contribute this year of Yen 115 billion. Nippon Steel's profits from its overseas operations have never come close to equalling those from its domestic businesses.

But it's the company's investment plans that clearly illustrate the company's new focus. "What is different from previous mid-term plans is that overseas investment exceeds domestic investment (for the first time)," Nippon Steel president Tadashi Imai told Japanese media Friday. Imai had been the driver behind Nippon Steel's takeover of U.S. Steel, as reported.

"While we have advanced investments in domestic operations, we will now focus on growth investments overseas," he said. All the pieces are in place to reclaim the No. 1 position globally. The timing to reclaim that position is now – having completed the acquisition of U.S. Steel on the strength of the earnings power cultivated in Japan."

The 100-million-tonne target

The global crude steel capacity target of 100 million t/y has been Nippon Steel's oft-spoken ambition for at least the past five years, the goal having been included in the company's previous mid-term management plan begun in April 2021 which expires next March.

During the fiscal year to March this year, Nippon Steel had 44 million t/y of domestic crude steel capacity and 19 million t/y abroad. By March next year, while the domestic capacity will remain unchanged, its buyout of U.S. Steel, plus new investments in India and elsewhere, will lift the overseas capacity share to 46% or 38 million t/y and take Nippon Steel's global total to 82 million t/y.

By Fiscal 2030, this will grow to at least 87 million t/y, with the expected commissioning of the first phase of the Rajayyapeta integrated steel works project in eastern India's Andhra Pradesh state. This project is being actioned by AM/NS India, the 60-40 joint venture formed between ArcelorMittal and Nippon Steel in 2019 to acquire Essar Steel and expand Essar's Hazira plant in Gujarat state, as Mysteel Global reported. Phase 1 of the Rajayyapeta works is to be completed by January 2029 and will have a 7.3 million t/y capacity.

Source: Nippon Steel

Where the other 13 million t/y of capacity will come from to meet its 100 million t/y target from Fiscal 2030 onward Nippon Steel does not say, understandably enough as it would clearly have other M&A and capacity expansion deals it's quietly pursuing. It also notes though that Phase 2 of the Rajayyapeta plant adding another 10 million t/y would be commissioned around then and the expansion of the Hazira plant.

One source of extra capacity for Nippon Steel that has not been widely reported is U.S. Kosice (USSK), a small integrated steel works located in Saca, Kosice, Slovakia, that U.S. Steel had acquired in 1998 and which Nippon Steel picked up as part of its U.S. Steel takeover. USSK produces hot and cold rolled sheets, galvanized, tinplate and non grain-oriented electrical sheets – as does Nippon Steel – though its capacity is tiny at 4.7 million t/y in three blast furnaces.

However, Nippon Steel itself describes USSK as having a site area equivalent to that of its Kimitsu works near Tokyo which has a crude steel production capacity of 10 million t/y, implying that USSK could be ripe for an expansion.

"Europe is the world's third largest steel market, and it (USSK) can act as an 'insider' due to tariffs, safeguards, and the EU's Carbon Border Adjustment Mechanism," Imai noted, positioning the Kosice mill as a useful foothold in Europe for Nippon Steel.

Meanwhile, back in Japan ......

In tandem with shrinking domestic demand for steel, Nippon Steel is scaling back operations in Japan and instead, conserving its energy and financial resources for its overseas advances. It notes that during the course of the current management plan starting in 2021, it had permanently shut five blast furnaces in Japan, bringing the total in operation now to just ten, which had reduced capacity by 20% to about 40 million t/y.

"Domestic demand for steel has declined more than expected over the past five years (and) we expect it to continue to decline for the next five years," Imai remarked on Friday. "It is currently below 50 million t/y, but a decrease in the scale of several million tonnes is inevitable," he admitted. "Movements such as the relocation of automobile production from Japan to the United States will also have an impact that cannot be ignored," he added.

Domestic steel production is already heading down. The most recent Japan Iron & Steel Federation production data suggest Japan's calendar 2025 crude steel output could total about 80.8 million tonnes, well below last year's total of 84 million tonnes and the 87 million tonnes produced in 2023, as Mysteel Global has reported.

In Friday's announcement, references to its domestic business goals were tired and empty, resembling some of its domestic steel works. The company vowed to "improve profitability by further strengthening the earnings base, thoroughly pursue cost competitiveness in the steel sheet business (and) also clarify the main role of each works and production line, and make centralized production to improve efficiency."

"We will also make thorough efforts to improve productivity across Nippon Steel and cooperating companies, as well as to promote operational reforms and streamlining in order to secure cost competitiveness to prevail in international competition," the company vowed.

Written by Russ McCulloch, russ.mcculloch@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com