UPDATE 1-Japan's Nippon Steel to cut 10% of crude steel capacity -Nikkei


TOKYO, Jan 31 (Reuters) - Japan’s Nippon Steel Corp , the world’s third-biggest steelmaker, is likely to cut about a tenth of steelmaking capacity, the Nikkei business daily said on Friday, in what would be an unprecedented move for the steel industry.

Nippon Steel plans to close both blast furnaces at its Kure Works “within a few years” and may shut down the entire steelworks in the face of rising output in China, the Nikkei said, without citing a source.

Besides cheaper products from China, Japanese steelmakers face a future of stagnant domestic growth as the population declines and a construction boom from the Tokyo Olympics and rebuilding in areas hit by the 2011 quake and tsunami fades.

“This would be the first closure of an integrated steel mill in Japan of this magnitude,” said Jefferies analysts Thanh Ha Pham and Sangin Yun in a note.

Nippon Steel acquired the Kure Works in the western region of Hiroshima when it completed its takeover of Nisshin Steel last year. Other industries in Japan, such as refining, have seen similar moves after mergers, as the population contracts.

No decisions had been made on the matter, however, Nippon Steel said.

“The report is not based on our announcement,” it said in a statement.

“We are continuously considering measures to strengthen competitiveness of our steel business and we will announce any decisions when they are formalised.”

Japan’s biggest steelmaker by output has seen its profits hit as slumping steel prices in Asia have dented its export margins and a series of suspensions at local facilities caused by typhoons and fires interrupted production.

Last month, a senior executive said Nippon Steel may close more blast furnaces as part of plans to reduce domestic facilities and costs.

Nippon Steel has 15 blast furnaces across Japan, with annual output of 52 million tonnes of crude steel. It has already said it plans to close one of two furnaces in the western city of Kure by about March 2024, as well as another at its Yawata Works in Kokura, on the island of Kyushu, by March 2021.

Global crude steel production reached 1.87 billion tonnes last year, up 3.4% from 2018, data from the World Steel Association showed. Output from China, the world’s biggest producer and consumer, climbed to a record just shy of 1 billion tonnes.

Reporting by Yuka Obayashi and Aaron Sheldrick; Editing by Christopher Cushing and Clarence Fernandez