Nippon Steel Shifts Focus to Rival Chinese Mills in Global Steel Market

Creating an entity to compete more effectively with China, the world’s biggest producer and consumer of steel, was touted as a key rationale behind the Japanese firm’s planned US Steel acquisition. But buying US Steel would have funneled billions of dollars of Japanese investment into a country that China doesn’t really sell to.

If its legal maneuvers fail, Nippon Steel will be obliged to find other avenues for growth that could involve funding a more intense rivalry in markets that Chinese mills do care about. Chinese exports have surged over the past couple of years as steelmakers have been forced to sidestep the country’s property crisis and look overseas to clear their mounting surplus. That’s put world prices under sustained pressure, creating much of the momentum for Nippon Steel’s US foray as Japan’s biggest mill sought to decisively break out of its own moribund domestic market. While the failed acquisition won’t have a big direct impact on China’s steelmakers, it’s likely to shift the Japanese firm’s focus “to other markets where there may be more competition with Chinese mills,” said Tomas Gutierrez, an analyst at Kallanish Commodities Ltd. The potential battlegrounds range from Southeast Asia to India and Brazil. Those are all markets where Nippon Steel has existing partnerships, including with the world’s second biggest mill ArcelorMittal SA, or has flagged as targets for expansion. They also include some of the countries that have seen the biggest increases in Chinese steel imports this year. India holds great promise for steelmakers, given the growth potential from its ongoing urbanization and infrastructure buildout. The government is also keen on raising domestic output and is one of many countries to impose anti-dumping measures on Chinese imports, which makes Nippon Steel’s foothold there even more valuable

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