Japan’s Largest Steel Company Withdraws from China, Shifts Focus to United States and India

Japan’s largest steel company, Nippon Steel (Nippon Steel), is set to withdraw from China and expand into target markets such as the United States, India, and Southeast Asia.

According to Nikkei Asia, on Friday, Nippon Steel plans to acquire U.S. Steel and build a blast furnace in India to achieve its goal of localized production in India. These initiatives are crucial components of the company’s ambitious future plans.

In contrast, Nippon Steel has decided to terminate its joint venture with Baoshan Iron and Steel Company in China after the contract expires on August 29, completely severing ties with Baosteel.

To facilitate the acquisition of U.S. Steel, Nippon Steel has specifically invited former U.S. Secretary of State Mike Pompeo to serve as a strategic advisor.

On Sunday, Pompeo expressed in an article in The Wall Street Journal, stating: “Nippon Steel’s future acquisition of U.S. Steel will prioritize American steelworkers, their families, and the U.S. manufacturing sector.”

Takahiro Mori, the Vice Chairman of Nippon Steel leading negotiations with U.S. Steel, noted that Pompeo is respected not only by Republicans but also by Democrats. He stated that Pompeo is the company’s advocate in the U.S. political sphere, providing momentum for the deal.

Nippon Steel is determined to finalize this acquisition. Mori has visited the U.S. five times this year to meet with nearly 700 relevant individuals. He expresses confidence that American unions opposing the acquisition will eventually change their minds.

The United States is one of the few developed countries experiencing continuous population growth. According to U.S. government statistics, the population is projected to increase from 335 million in 2023 to 370 million by 2080. As manufacturing returns to the U.S., Nippon Steel believes that the country’s steel demand will be robust in the future.

On the contrary, China’s steel demand is weakening due to a slowdown in the real estate market, despite sustained high production levels, indicating signs of over-competition.

Additionally, China’s swift transition to electric vehicles has posed challenges for Nippon Steel’s customers, particularly Japanese car manufacturers, with Honda already scaling back production in China.

Nippon Steel’s overseas expansion, particularly its previous expansion in China, was largely in line with the overseas investments of Japanese automakers. Nippon Steel’s downstream factories in overseas markets process steel imported from Japan into high-tensile steel sheets, which are then sold to local enterprises.

Mori stated, “China was once an opportunity, but now it resembles more of a risk.”

Currently, Nippon Steel is pursuing a new offshore model by integrating the upstream and downstream production processes to expand from blast furnaces and electric furnaces.

The company plans to increase crude steel production capacity from the current 66 million tons to 100 million tons. The additional capacity will all be located overseas, with a focus on three key regions: the United States, India, and Southeast Asian countries.

According to projections by the Indian research firm SteelMint, India’s steel demand is expected to increase from 120 million tons in 2023 to 190 million tons by 2030. As India’s population grows, infrastructure investment is also expected to rise continuously.

A joint venture between Nippon Steel and multinational steel company ArcelorMittal is constructing two blast furnaces in western India, set to commence operations as early as 2025, with a total investment exceeding 1 trillion yen (68.2 billion USD). The joint venture also plans to build an independent steel plant in eastern India.

Nippon Steel, headquartered in Tokyo, is Japan’s largest and one of the world’s leading steel companies.

The company is known for its exceptional competitiveness in the international market, excelling in research and development, technology, management, and product quality, positioning it as a top player in the steel industry. It has also successfully adopted a path of clean production through technological innovations, maximizing resource utilization efficiency, and reducing resource consumption.