Japan - 2009 July 21

Kobe Steel Ltd. cut production of ship parts by about 10 percent and forecast it will miss a sales target after the global recession ended a five-year boom in marine transportation. The company’s casting and forging sales will fall short of target by “several” billion yen in the year ending March 31 as shipyards request delivery delays, Soichi Kimoto, general manager of planning and administration at the division, said in an interview yesterday. Shipowners held back purchases of new vessels from the fourth quarter of 2008 as demand declined. Global orders for 807 new ships were cancelled in October to May, Tokyo-based Mitsubishi Heavy Industries Ltd. said June 4 in a presentation. Kobe Steel controls about 40 percent of the market for crankshafts, used to drive propellers. “The shipbuilding industry started to see the impact of the recession” later than other manufacturers, Kimoto said at Kobe Steel’s Takasago factory in western Japan. “Some of our customers asked us to postpone the timing of shipments by several months at most,” he said. The crankshaft plant was operating at 10 percent below capacity, he said. The company’s shares were unchanged at 162 yen at 11 a.m. in Tokyo. The Nikkei 225 Stock Average added 0.4 percent. Kobe Steel, which will complete a 30 billion ($320 million) expansion of the Takasago factory by April, is also unlikely to operate the new facilities at capacity and is considering a cut in working days and other cost-reduction measures, Kimoto said. Output Capacity The investment will increase output capacity for low-speed diesel engine crankshafts by 50 percent to 540 a year by April 2010, compared with 360 for the year ended March 2008, Kobe Steel said in April last year. The company decided on the expansion before the financial crisis dried up ship orders. Sales at the casting and forging division rose to about 60 billion yen last fiscal year, from 50 billion yen, and the business had planned to match that level this year, Kimoto said. Kobe Steel posted total sales of 2.18 trillion yen last fiscal year from operations including output of steel, aluminum and copper products, cranes and compressors. Kobe competes with South Korea’s Doosan Heavy Industries & Construction Co., Hyundai Heavy Industries Ltd. and Japan’s Sasebo Heavy Industries Co. in making crankshafts. About 80 percent of the company’s crankshafts are used in container ships, oil tankers, bulk carriers and other vessels built by Japanese yards and the company will continue to place priority on domestic sales, Kimoto said. Exports are mostly to China where the company will seek to increase sales through a joint venture with Japanese partners, he said. “We will sustain ties with Japanese shipbuilders,” which have stable operations and fewer order cancellations, he said.