Nippon Steel prepares to pour money into tough U.S. steel turnaround - Nikkei

Nippon Steel prepares to pour money into tough U.S. steel turnaround - Nikkei

Nippon Steel, the Japanese steel giant, is set to invest $11 billion in its newly acquired U.S. Steel, aiming to revitalize the ailing American steel industry. The investment, part of a broader strategy to boost capacity and profits, is expected to yield significant results by 2028.

The acquisition, which closed in June 2022, has been accompanied by a series of ambitious plans to modernize U.S. Steel's operations. The investment will focus on expanding capacity and introducing advanced technologies to produce higher-grade steel products. Key projects include the construction of a new hot-rolling mill at Mon Valley Works in Pennsylvania, the refurbishment of the No. 14 blast furnace at Gary Works in Indiana, and the addition of new electromagnetic steel sheet lines [1].

Nippon Steel's Vice Chairman Takahiro Mori has stated that the investment will lift U.S. Steel's annual profit contribution to 250 billion yen ($1.7 billion) by 2028, up from an expected 150 billion yen in 2026 and 80 billion yen in the current year [1]. Mori also mentioned that the real effects of the investment will be visible after 2028, with the potential for profitability to exceed 250 billion yen.

The investment plan, which is part of Nippon Steel's new medium-term business strategy, includes a new hot-rolling mill and the refurbishment of blast furnaces, among other projects. The total investment is expected to be funded initially by U.S. Steel, with Nippon Steel stepping in if resources prove insufficient. Nippon Steel has also indicated flexibility with hybrid financing options, including convertible and corporate bonds [1].

The acquisition and subsequent investment plan have significant implications for both the U.S. and Japanese steel industries. The combined capacity of Nippon Steel and U.S. Steel is expected to reach 86 million tons, bringing them closer to Nippon Steel's long-term goal of 100 million tons of global annual crude steel capacity [1].

The investment in U.S. Steel is also part of a broader trend in the steel industry, where companies are focusing on modernization and technological advancements to enhance competitiveness. This trend is expected to continue, with Nippon Steel's investment potentially setting a precedent for other steelmakers to follow suit.

References:

[1] https://www.zawya.com/en/economy/global/nippon-steel-bets-on-11bln-investment-tech-transfer-to-lift-us-steel-profit-gi2e0r19
[2] https://www.canarymedia.com/articles/green-steel/nippon-reline-indiana-gary-coal-furnace
[3] https://asia.nikkei.com/business/materials/nippon-steel-prepares-to-pour-billions-into-tough-u.s.-steel-turnaround
[4] https://finimize.com/content/nippon-steel-bets-big-on-revamping-us-steel-operations