The strength of Nippon Yakin lies not only in its stainless steels, but also in its wide range of high nickel alloys, which offer excellent corrosion and heat resistance. These products are supported by manufacturing technologies developed over many years, and delivered to customers around the world by a global sales network. We sit down with president Hisashi Kubota, who explains how Nippon Yakin Kogyo is leveraging its near century of manufacturing experience to create high-performance stainless steels and nickel alloys in high demand by the green economy.
I would like to begin with your take on the regional manufacturing landscape. In the last few decades, Japan has seen the rise of regional manufacturers in places like China, South Korea, and Taiwan that have replicated the Japanese monozukuri manufacturing process. Yet we still see many Japanese firms with large global market shares, especially in B2B markets and niche fields. What do you consider some of the competitive advantages of Japanese firms that allow them to maintain high global leadership positions?
First, we must remember that Japan learned from the United States and European countries in the 19th century when we modernized. Japan was able to succeed in having heavy industries and was the first in Asia to modernize. I feel that within the Asian region, we still have the advantage as the forerunner.
Another thing we must remember is Japan’s propensity towards craftsmanship and manufacturing. I feel that Japanese people respect the craftsmanship, technology, and techniques that are necessary to create great products. China, Korea, Taiwan, and other countries doing mass production who were followers of Japan are now leaders. Japan still has a strong lead in terms of technology and quality, and this is where Japanese monozukuri will help us to survive and have international success.
Japan used to be the world’s number one producer of stainless steel, with Nippon Yakin being one of the most well known stainless-steel producers in Japan. Now China is producing more than half the world’s supply (about 50million tons per year)..
Many of the world’s major stainless-steel makers are Chinese firms, and there is also the big POSCO group in Korea. In Europe, there used to be one company per country, but some of those companies have now merged. Japanese production volume of stainless steel is less than one tenth of those produced by Chinese manufacturers.
Considering these facts, we have shifted our focus to high-performance nickel alloys. When it comes to nickel alloy producers, we do not have any immediate competitors in China or Korea. However, Europe is the region that invented nickel alloy, and we also have strong competitors in the United States. Although the number of steel factories has been decreasing in the U.S., they still have a strong foothold in the aerospace and military companies, and traditionally they are skilled with the materials that are related to those fields.
Nippon Yakin Kogyo is now the sixth producer in the world of nickel alloy, but in 2019, we were ranked the second in the field of flat products such as plates and coils. While we are currently an SME for stainless-steel, we are one of the leaders for high nickel alloy, and it is expected that nickel alloy will have an increasing demand as we pursue a carbon-neutral society.
Stainless steel is produced by adding 10.5% or more chrome to iron. At that level it gains s non-rusting quality, and if you add nickel, it becomes the representative stainless steel. We have been increasing the variety of our products and expanding beyond stainless steel, and we provide to society high-performance alloys which contain over 20% nickel.
There are some areas in which we are the number one leader in the field, including an anti corrosion nickel alloy that is used for the oil and gas industry, a heat-resistant alloy that is used for sheathed heaters used for home appliances such as coffee makers, electric pots etc.Pure nickel is used for making caustic soda plants, and is expected to be used for hydrogen related industries in the future.
Regarding the aerospace field, last year we had the pleasure of interviewing Mr. Nikkaku the president of Toray Industries, and he explained to us how they make the CFRP for the fuselage of Boeing. He told us that many airplane makers are driven by government regulations and have needed to create planes and fuselage that are lighter weight. We are seeing that the consumption of very heavy metals, such as iron or nickel, is decreasing when building airplanes, and this is happening to the profit of lighter materials such as CFRP. He also said that every ten years, airplanes lose approximately 20-30% of their weight. How is that demand for new, lighter-weight materials impacting your development?
We provide anti-expansion alloy to be used for the die to produce the CFRP for airplanes body and wing. Our customers are heavy industry, and they manufacture those products then they send them over to airplane manufacturers. Our materials are also used for the cast for organic EL (electroluminescent) and for electrical appliances which have been used at a high rate during Covid-19 since people are staying at home more.
Japan has a reputation for high-quality products and a culture of craftsmanship. But being an island nation that is scarce in resources, it is very important to make the most of materials that you have while making the highest-quality products. We see this culture of craftsmanship under threat given Japan’s demographic decline, where in the next 15 years, one in three Japanese people will be over the age of 65. Can you tell us what the impact of Japan’s demographic shift has been here at Nippon Yakin Kogyo and how you are going to overcome these challenges moving forward?
Maybe I can be a prime minister if I can answer your question right away. In Japan, the utilization of the aged has progressed. But Japan is still not good at utilizing women-power, so one major pillar needs to be providing a good working environment for women. At the same time, Japan as a country will be accepting foreign workers, so we need to take an open approach to hiring foreign workers, but this is difficult since Europeans and Americans struggle with immigration problems.
It is true that the market will shrink, and the demand will be less with a smaller population, but this is only true if you continue to make the same product. Domestically, it is important for us to go with the flow, to go with the changes in lifestyle and provide new products accordingly. And at the same time, it is important to face the global market in approach. I entered the company 40 years ago, and it was still very domestic at that time with only some exports. Producing high-performance alloys, it was inevitable for us to go to the global market, but I never imagined that we would have offices in Chicago and London.
The environmental impact of the business is especially topical given then Prime Minister Suga’s mandate that by the year 2050, when Japan will become a carbon-neutral society. We are seeing Japanese firms rushing to develop initiatives to lower their carbon footprint for that sake. We know that Nippon Yakin renewed a water waste processing facility at its Kawasaki plant, but could you tell us more about the initiatives you are developing to contribute to a carbon-neutral society?
Other than the water treatment system, we are now also constructing a new electrical furnace. Before this carbon-neutral society was proposed, we were already moving in that direction and promoting an electrical furnace which emits less carbon.
Existing two furnaces will be merged into one furnace, which leads to reduction of electricity usage by 20%. The new furnace is both environmentally friendly and employee friendly by taking measures to prevent emitting any dust. It is a very efficient electrical furnace that we plan to complete by this December.
Regarding carbon neutrality, stainless steel has long longevity and is recyclable, with approximately 80% of the product coming back to us and being recycled in the furnace. There are many high-performance alloys to be used in the renewable energy sector.
Another one of the materials that sells well from our company is material for polycrystalline silicon manufacturing equipment for solar cells, and we expect that there will be an increase in demand in hydrogen-related materials as well.
Talking about the hydrogen-related material, we saw that some of your materials are utilized for fuel cells. Can you tell us more about these efforts and the solutions you are bringing for cleaner and renewable energies?
Hydrogen stations that supply hydrogen, which is the fuel for fuel cell vehicles, are used in a high-pressure environment, and there is a high risk of hydrogen embrittlement (a phenomenon in which materials are exposed to the hydrogen environment and become brittle). Therefore, there are some parts that cannot be applied with normal type 304 etc., and our modified type 316L with improved hydrogen vulnerability by optimizing the components is used.
I am eager to learn more about your products and their applications such as the NAS800T that you have used to create the world’s widest heat-resistant nickel alloy product. Previously, having a product over 3,000 millimetres wide was unheard of, yet you managed to produce one that is 3,270 millimetres wide. What are some of the new applications of having such a wide product?
Before I talk about the product itself, I want to mention that we have a joint venture with a Chinese company called Nanjing Iron and Steel Company, and we used their facility to make this product. In terms of a hot rolling mill, we do not have a big enough roller that could cater to the width, and while our Chinese partner does not produce stainless steel or nickel, they have a big hot mill as well as triple the power and a five-metre width.
Wide plates of NAS800T are used for industrial machinery and plants. Huge industrial plants require a wider plate, and if you produce it in a wider size, it is more cost-effective. That is why we combined our knowhow with their facility to produce the world’s widest high performance alloy plates.
I also want to ask about your Polka Plates made from type 304 stainless steel that feature round dots. Can you tell us how the Polka Plates are different from traditional Checker Plates?
Our Polka Plates, which have functionality that is easier to clean than Checker Plates, are mainly used by food manufacturers and pharmaceutical companies that require a hygienic environment. Even if powder or dust collects on the floor, the polka dot shape with rounded protrusions prevents the cleaning jig from getting caught and makes cleaning easy. Also, in factories, the floor surface may get wet and slippery, but Polka Plates also have the property of being non-slippery. They are also used on ships because it is not slippery even when it is wet or when snow accumulates. Furthermore, because it is excellent not only in functionality but also in design, it is often used as a flooring material for stores and museums.
When it comes to the importance of collaboration and co-creation, you already spoke about your joint venture with Nanjing Iron and Steel Company for creating your wide-plate alloy products. Can you tell us what role co-creation and collaboration play in your business model? And are you looking for any new joint ventures or international collaborations?
What kind of criteria do you look for when you are looking for partners? What is the sign of a good company?
We do not have any specific projects for new joint ventures, but we may consider any suitable opportunity in the future. Although the main market for high nickel alloys exists overseas, we have no plans to set up our own factory overseas. When considering co-creation and collaboration with overseas companies, it is necessary to have a perspective of "what is the best way to expand sales of final products to the global market?" I think that strengthening inventory, processing and sales functions will be an issue.
We were surprised when we looked at your financial performance and saw that from fiscal year 2017 to fiscal year 2018, your ordinary profit jumped by more than 100%, going from ¥3.4 billion to over ¥8.2 billion. Why did this happen?
The significant increase in profits in FY2018 was due to the improvement in selling prices due to the rise in the price of nickel as a raw material, and the demand for high-performance materials for applications in the oil and gas fields, flue gas desulfurization equipment, and the environment for ships such as Sox scrubbers. A major factor is the steady performance in a wide range of fields such as applications for the energy field, jigs for manufacturing organic EL displays, and applications for durable consumer goods such as bimetal and sheathed heaters. Comparing the sales volume of the previous year in FY2017, stainless steel increased by 4.8%, while high-performance materials increased by 23.2%.
In FY2019 and FY2020, the sales volume decreased due to the impact of the COVID-19, resulting in a significant decrease in sales and profits. Due to the recovery of economic activity by the government and the economic policy by the financial support of the governments of each country, the sales volume of our company has also been recovering. Increased global demand for steel and soaring raw materials have also helped to penetrate the rise in selling prices. Regarding our high-performance alloys, demand for solar power generation has expanded in China, and demand for semiconductor-related parts, which are in short supply worldwide, is also strong. New demand for hydrogen energy-related products in Europe is increasing.
We know that you already have a diverse international profile, being present in Chicago since 2011 as well as in Shanghai, Singapore, and London. Looking toward the future, which markets are key for you? What areas or regions are you prioritizing?
Half of our overseas sales volume is in the Chinese market, but it is risky to just have a single core market, so we need to diversify. In addition to the US and European market, we focus on Asian countries such as India. We would like to further enhance our global sales network.
You mentioned that you have been working at Nippon Yakin Kogyo for more than 40 years, and you have seen the company grow throughout time. Imagine that we have this interview again on the very last day of your presidency before you leave for another position or retire. What objectives would you like to have achieved by then? And what would you like to leave behind as your legacy at the company?
Looking back at our history, my question has been whether Japanese steel manufacturers have been evolving or not. In our company, the number of employees has been reduced by half, so if you consider growth as having a lot of employees, we are not growing at all. But I believe the definition for growth will change with the declining population, aging population, and the pursuit of a carbon-neutral society.
Our company will need to focus not only on the amount of production but also on the quality of production. By further improving profitability as a result of quality production, we want to give back to the stakeholders as well as the employees. My hope would be to have strong facilities and infrastructure that I can pass onto the next generation.
Our company has contributed to and will continue to contribute to various product line-ups, but what I strongly desire and hope for is that this company will be a place where employees can feel proud and confident.
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