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Nippon Steel plans to boost overseas capacity, scale down at home

TOKYO (Reuters) - Nippon Steel Corp is planning to raise output capacity in overseas markets such as India and the United States and reduce it in Japan to align with future demand levels, a company executive said.

The logos of Nippon Steel Corp. are didplayed at the company headquarters in Tokyo, Japan March 18, 2019. Picture taken March 18, 2019. REUTERS/Yuka Obayashi/Files

“Our imminent task is to improve our overseas profits by capitalising on recovering global demand from automobiles,” Executive Vice President Katsuhiro Miyamoto told Reuters in an interview on Wednesday.

“In the mid-term, we want to expand our production capacity overseas where demand is expected to increase,” he said. Last year, Japan’s biggest steelmaker and ArcelorMittal, the world’s largest steelmaker, jointly bought India’s bankrupt Essar Steel, which has an annual capacity of 9.6 million tonnes.

The companies plan to boost the capacity of the new venture, ArcelorMittal Nippon Steel India, to 12 million-15 million tonnes as planned and further in the future, Miyamoto said. “We will also look to expand capacity at its pellet plant on the east coast,” he said.

Nippon Steel is also considering to build a new electric furnace at its U.S. joint venture with ArcelorMittal in Calvert, Alabama.

“We may build a furnace of 1.5 million tonnes of annual output capacity as a first step,” Miyamoto said.

“Having our own iron source means a shorter lead time and fewer inventories,” he said.

ArcelorMittal said in September it would sell its U.S. assets to Cleveland-Cliffs Inc, except for some assets like the Calvert facility.

Nippon Steel is still in talks with the parties involved on whether it will keep its stake in its other U.S. joint venture with ArcelorMittal, I/N Tek and I/N Kote, in Indiana, Miyamoto said.

Nippon Steel expects to book a net loss for a second straight year, as the COVID-19 pandemic decimated demand.

Even before the outbreak, it had been grappling with falling demand at home and competition from China, which forced it to shut nearly 10% of its production capacity.

But demand from automakers is picking up faster than it had anticipated a month ago, Miyamoto said.

“We expect domestic steel demand and our steel output in the next financial year (starting in April) to come to somewhere between the 2019 and 2020 financial year’s levels,” Miyamoto said.

Asked what he expects after U.S. President-elect Joe Biden takes office in January, Miyamoto said: “The U.S. import restrictions taken by the Trump administration have led to a spread of protectionism worldwide. We hope this will change toward free trade.”

Reporting by Yuka Obayashi; Editing by Ramakrishnan M.