Bloomberg News

Kobe Steel to Expand in Asia as Japan Growth Slows, Sato Says

April 14, 2010

Kobe Steel Ltd. (5406), Japan’s fourth- largest mill, said it expects industry steel demand in Japan will remain “flat” in five to 10 years, prompting it to expand overseas to tap rising growth in China and other Asian nations.

Overseas sales may account for 50 percent of all revenue by between 2015 and 2020, from about 30 percent for the year ended March 2009, as it expands plants and increase exports to Asia, Chief Executive Officer Hiroshi Sato said today at a press conference in Tokyo, when the company outlined a mid-term plan.

Kobe Steel, Nippon Steel Corp. (5401) and other steelmakers in Japan, the world’s second-largest steel producer, are expanding in Asia to counter waning domestic demand. Kobe Steel said today it will spend 2.5 billion yen ($26.71 million) to set up a unit in Suzhou, China to produce aluminum forgings for auto suspensions.

Kobe Steel plans to produce about 8 million metric tons of crude steel for the next five to 10 years in Japan, Sato said without specifying the level of overseas output. The level matches a 2007 record of 8.07 million tons and compared with 6.6 million tons expected for the year ended March 31.

Under the management plan unveiled today, Sato will seek to generate 3 trillion yen of annual sales within 10 years, of which 40 percent will be accounted for by steel sales. The company said on March 29 sales will total 1.68 trillion yen for the year ended March 31.

Kobe Steel said on April 2 it won approval from Vietnam’s government to build a $1 billion factory in the Southeast Asian country and will start a feasibility study for the project.

Kobe Steel shares, which have risen 24 percent this year, fell 1.4 percent to 209 yen today on the Tokyo Stock Exchange.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Yasumasa Song in Tokyo at ysong9@bloomberg.net.

To contact the editors responsible for this story: Andrew Hobbs in Sydney at ahobbs4@bloomberg.net.


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