Mitsubishi cuts costs in steelmaking equipment

Mitsubishi Heavy Industries Ltd., a manufacturer of a wide range of products from submarines to nuclear reactors, is committed to cutting costs in the steelmaking equipment sector with Siemens AG, a German company.
In January last year, the merger of Mitsubishi Heavy and Siemens divisions formed Primetals Technologies Ltd, 51 percent of which is owned by the Japanese company. The new venture will accelerate the integration of manufacturing and engineering departments, Executive Vice President Kazuaki Kimura said. “In difficult times, this will give us a chance to make radical changes in the structure of the business,” said Kimura.

Primetals is one of the three largest steelmaking equipment manufacturers with an 11 percent share of the world. Siemens' 49 percent stake allows it to sell products such as electric ovens and foundry equipment in Asia, including Japan, where the German company had no previous presence.

By becoming manufacturing partners, the two firms compete in the equipment market, from which Mitsubishi draws about half of its operating income. The integration of Primetals will result in the loss of about 1,000 job losses, with about 7,000 at Mitsubishi Heavy. The Japanese company expects long-term growth in the steel equipment market, but cannot foresee exactly when it might happen. “Steel is the backbone of the industry in all countries that will need metal. We will wait for the market to recover, ”Kimura said.

The global steel equipment market shrank to $ 2 trillion. yen ($ 18.8 billion) for the fiscal year ended March, from $ 2.4 trillion. yen a year earlier, according to the Tokyo-based company, which warns it cannot predict when demand will allow good pickup again.