NISSHIN STEEL CO., LTD. History

Company History:

Primarily a maker of stainless and surface-coated sheet steel, Nisshin Steel Co., Ltd. has escaped the worst effects of the world steel industry's severe decline since the oil crisis of 1974. Although Nisshin has suffered its share of worker layoffs and mediocre financial performance its traditional strength in specialty surface-treated steels--certain alloys gave the company an advantage in the race among Japanese steelmakers to develop more complex value-added products. Nisshin has even branched out of steel altogether, joining partnerships in such fields as fast-food restaurants and retirement-community development.

Although little information is available about Nisshin's history, it is clear that the company's original as well as present talents lay in the manufacture of coated steel. Steel is invaluable for its strength and formability, but it is subject to destructive oxidation in the presence of gas or water. Coated steels were developed around the beginning of the 20th century to provide rust protection for metals used in wet or damp environments. The best all-around coating agent was found to be zinc, which, when applied in a molten state to steel, forms a tight, waterproof casing that lasts up to 30 years. This process, known as galvanizing, became one of the most commonly used modifications of steel and the basis for many subsequent innovations in coating technology.

Nisshin's earliest predecessor, Nichia Steel, was the first Japanese company to produce galvanized steel. Nichia was founded in 1908, when the Japanese iron and steel industry was still far behind Western levels of production and technology. It galvanized the steel by dipping each sheet in zinc in a laborious process that kept output low and costs high. The market for galvanized steel was equally limited, however, since the Japanese economy did not yet include the modern plumbing, construction, and automotive industries that would later create much of the demand for galvanized steel.

In 1911 Nichia absorbed a rival firm called Galvanizing Company, which had a plant in Osaka. As its name suggests, Galvanizing Company was also limited to the production of zinc-coated steel, and together the merged companies assumed a dominant position in Japan's early galvanizing industry. Galvanizing remained Nichia's primary business for many years, but Nichia also became interested in new alloys made by combining iron with varying amounts of nickel, chromium, molybdenum, and other metals to produce steels with unusual, commercially valuable characteristics. Such steels are used widely in the tool and die and automotive industries that became more important as Japan evolved toward a wartime economy in the 1930s. In 1928 Nichia Steel was incorporated as Tokuyama Teppan Kabushikigaisha.

In 1934 Tokuyama Teppan opened a new, highly integrated steel plant at Amagasaki. The works at Amagasaki, near Osaka, contained Tokuyama Teppan's first crude-steel production equipment and became the center of the company's operations for many years. Once bolstered with a secure, in-house supply of its own steel, Tokuyama Teppan was able to improve efficiency and lower its operating costs in time for Japan's plunge into war with China and the Allies. World War II brought Tokuyama Teppan, like all of the Japanese steel industry, under the tight control of Japanese government authorities, who needed unprecedented amounts of steel for everything from ships to shell casings.

Japan's steel industry was targeted for heavy bombardment by the Allies and suffered severe damage by the war's end in 1945. Postwar Japanese steel production remained critically low for a number of years, until the United States began providing financial and technical assistance to its key industries. Tokuyama Teppan resumed substantial production as early as 1949, when it was listed on Japanese stock exchanges for the first time. Two years later, Tokuyama Teppan opened an extensive plant at Kure, which would become the company's new center of crude-steel making and its largest employer. When blast furnaces were added in 1962, Kure became the company's only plant with complete iron- and steel-making capabilities.

As a manufacturer of galvanized and specialty steels, Tokuyama Teppan was oddly slow in entering the growing stainless steel business. It had been manufactured since the early part of the 20th century and became integral to the growth of the appliance and automotive industries after World War II. As such, it was a natural area for expansion by Tokuyama Teppan, and in 1958 the company began stainless production at its new Shunan works. Shunan remained limited strictly to stainless steel, adopting the most sophisticated technology available. By 1970 it was producing more stainless than any other plant in the world, and the company was Japan's leading stainless maker.

By that time, Tokuyama Teppan also had a new name. In 1959, Tokuyama Teppan merged with Nihon Teppan, another maker of specialty steels, and took its present form as Nisshin Steel Co., Ltd. With Japan's postwar economic miracle in full swing, Nisshin's sales climbed rapidly, fueled for the most part by the extraordinary expansion of the Japanese automotive, construction, and appliance industries. Nisshin was among the leading innovators in Japanese steel, winning a reputation for technological wizardry that led to many overseas contracts for plant design and manufacturing consultation. Particularly impressive was Nisshin's 1965 introduction of a new method of continuous zinc coating, which yielded a far more durable galvanized steel product. The new method, known as the gas wiping method, allowed manufacturers to apply a zinc coating of uniform weight to steel sheets by applying the zinc as a vapor. The process soon was adopted widely throughout Japan and licensed overseas.

Such technological breakthroughs helped push Nisshin's sales to ¥129 billion in 1969 and made possible a number of important overseas partnerships. In 1970 Nisshin was asked to help create the first Japanese steel operation in Europe. At the request of a large Spanish bank, Banco Español de Credito (Banesto), Nisshin and Nissho-Iwai, a Japanese trading firm, supplied a small amount of capital and all of the necessary technical assistance in building a large stainless steel plant near Malaga, Spain. The plant was fully completed by 1978. By then Nisshin was involved deeply in a similar project in Romania, where Nisshin designed and helped construct a stainless steel manufacturing facility. At various other times, Nisshin has formed joint ventures with, or worked on behalf of, organizations in France, Great Britain, India, Brazil, and the United States. The company's technical experience became increasingly valuable as the world steel market suffered from overcapacity and flat sales in the industrialized countries, forcing established manufacturers to evolve ever-more sophisticated products with which to protect their market shares.

The contracting steel industry faced especially severe problems after the oil crisis of 1973 and 1974. Japan and the industrialized world generally had reached a saturation point in its need for basic steel, as post-World War II construction slowed. In addition, the oil crisis precipitated a long depression in the automotive, shipbuilding, and construction industries--all heavy users of steel. Nisshin and its rivals moved quickly to develop more rarified steel products and to diversify out of steel entirely. Nisshin was fortunate in already having a mix of products that was weighted toward specialty steels, but during the 1970s it went considerably further in that direction.

Nisshin's response to the steel crisis was complex. It increased the efficiency of its basic processes, enabling the company to cut its employee rolls gradually from a high of 10,100 to its 1990 level of about 7,200. In 1981 Nisshin created two new planning departments to develop ideas for new businesses that could take advantage of the company's traditional strengths. Within a few years, Nisshin was involved in a plethora of such ventures. In 1982 it formed two new companies. Nikken Stainless Fittings Co., Ltd. is a 50%-owned joint venture with Riken Corporation. Nikken makes stainless steel pipe joints for water pipes and for air conditioners, and became involved in developing such products in plastic. Shunan Shigyo Co., Ltd., was formed by Nisshin in 1982 to recycle and market the kraft paper used as protective layering between steel sheets. In 1984 Nisshin joined Magne Corporation of Tokyo in creating Nisshin Ferrite Co., Ltd. to sell scrap iron as magnetic particles for the electronics industry. Nisshin further explored opportunities in electronics by acquiring technical information needed in the production of gold-plated stainless steel for use in micro-circuitry. Indeed, electronics figured large in Nisshin's plans, as in those of so many other Japanese companies, offering as it did a market for advanced metal products not easily duplicated by the younger generation of Third World steel competitors. In 1985 the company created a high-tech materials department to pursue new steel applications in the electronics field, particularly products needed in cathode-ray tubes, semiconductors, magnetic recording components, and printed circuit boards.

Much of Nisshin's work in electronics involved a refinement of its basic coating technology, usually the layering of a highly conductive metal such as gold over a base of steel or stainless steel. Nisshin's coating experience has allowed it to develop a number of other new products as well, including combinations of steel with aluminum, polyfoam, and polyvinyl chloride (PVC). Each of these innovations has found its particular niche. Rustproof aluminum-steel laminate sheets are used to reinforce automotive parts and in mufflers. Polyfoam-steel is used as a durable, colored roofing material. The PVC-steel sandwich provides automakers with light-weight, strong interior automobile body parts. These and other developments have greatly expanded the range of Nisshin's products for the construction and automobile industries while solidifying the company's technological lead over competitors in Japan and overseas.

In February of 1984 Nisshin purchased 10% of the stock of Wheeling-Pittsburgh Steel Corporation, then the eighth-largest U.S. steelmaker and a company whose products were roughly similar to those of Nisshin. The two companies also agreed to a broad range of technical exchange, and together subsequently built a galvanizing plant in West Virginia. Despite Nisshin's capital injection, Wheeling-Pittsburgh filed to reorganize under chapter 11 of the U.S. Bankruptcy Code in 1985. Nevertheless, the deal gave Nisshin a valuable entry into the huge U.S. market.

Nisshin is one of the few steel companies in the world that survived the 1980s profitably, and is clearly serious about balancing its steel operations with unrelated ventures. Meanwhile, Nisshin's strong position in specialty steels should allow it to benefit from the continuing explosion in new materials, where old dogs like steel are made to perform the very latest tricks.

Principal Subsidiaries: Tsukiboshi Kogyo Co., Ltd.; Nisshin Kokan Co. Ltd.; Nisshin Ferrite Co., Ltd.; Carmy, Inc.; Nisshin Koki Co., Ltd.; Tsukiboshi Art Co., Ltd.; Shinwa Kigyo Co., Ltd. (95.3%); Shinsei Kogyo Co., Ltd. (94.7%); Sun Techno Planning Inc. (70%); Tsukiboshi Kaiun Co., Ltd. (67.9%); Shunan Shigyo Co., Ltd. (66.7%); Osaka Stainless Steel Co., Ltd. (52%); Nisshin Steel Australia Pty. Ltd.; Nisshin Steel (Canada) Ltd.; Nisshin International Finance (Netherlands) B.V.; Wheeling-Nisshin, Inc. (U.S.A., 80%).

Source: International Directory of Company Histories, Vol. 4. St. James Press, 1991.

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