Japan's Nippon Steel eyes $2.5 billion overseas investment after 2018

30 September 2015

Japan's Nippon Steel & Sumitomo Metal Corp, which plans to spend 300 billion yen ($2.5 billion) on overseas expansion by March 2018, may set aside a bigger amount in the following years to propel growth abroad, its president, Kosei Shindo, said.

Nippon Steel's appetite for investments through mergers and acquisitions (M&As) may pique the interest of global peers in selling assets as they suffer from slumping steel prices, with Chinese mills swamping global markets with cheap products.

The Tokyo-based company is hunting for M&A opportunities to help expand its global customer base in growing sectors such as automobile, energy and infrastructure, Shindo said.

Two years ago, Nippon Steel and ArcelorMittal spent $1.55 billion to buy ThyssenKrupp AG's U.S. factory, a deal that analysts say was a bargain.

For now, however, Japan's biggest steel maker is allocating more funds to its home market, where it is upgrading aging facilities after a fire and other problems at its Nagoya plants last year.

"Our strategy is to reinforce our mother mills first. Then we expand overseas businesses," Shindo told Reuters in an interview on Friday.

"Once all of the old facilities are upgraded, we may go for a takeover bid or M&A, where the value could surpass 300 billion yen," he said, without giving details.

Under a three-year business plan kicked off in April, Nippon Steel set aside 1.35 trillion yen ($11.3 billion) for domestic capital investment, more than four times its overseas allocation.

With a shrinking population at home, the world's second-biggest steelmaker has no choice but to boost overseas operations.

Yet, given excess global capacity, Nippon Steel will stay away from investing in blast furnaces aboard until at least 2018, Shindo said.

"The biggest challenge for us now is to boost profitability of our overseas units," Shindo said.

Asked if the company wanted to buy stakes in mines of coking coal or iron ore, Shindo said: "We'll buy if it's a really good deal. But raw materials stakes are not our immediate target."