Nippon Coke: “We have a big responsibility to address the climate crisis”

When we look at Japan and its recent manufacturing history, we know that regional competitors can produce components often at a much cheaper cost production price, countries such as Taiwan for semiconductors or China where economies of scale allow for the mass production which translates into cheaper prices. What do you think Japan should do in order to face off this stiff price competition?

Price competition is something that is part of a world that is increasingly being globalized. I believe that the majority of Japanese makers have no intention to try to compete on this price competition factor; everyone is more focused on value added production and manufacturing. This is related to the essence of monozukuri and I believe there are three key elements. First, is the commitment to the product and meticulous care and devotion to it. I believe that Japanese pursue the highest standards to create the most added value to products. In order to do so they are continually adapting to try to improve and modify the product in the spirit of kaizen to make it more efficient in both design and aesthetic elements. Second, is the capable individuals who are able to support that industry and the product. Such individuals are actually a big challenge moving forward for Japan and we have to put a huge effort into rebuilding our workforce. Third, is the sustainable management of the business and something Japanese are very proud of as we have many companies that are over one hundred years old. There are of course large and small companies that have remained in business for this long. This Japanese stance towards the product is something that distinguishes us from our Taiwanese and Korean competitors because we continue to focus on the product through these three key monozukuri elements, as such we are not tied to its pricing but nonetheless add value to the product.

I wanted to pick up on what you mentioned in regard to the age of Japanese companies and the accumulation of know-how and passing of it from generation to generation. In the case of your company, we know that you celebrated your one hundred and thirtieth anniversary in 2019. Could you run us through what you believe to be your company’s most important milestones during that phase and what are the key technical developments for your company during that time?

As you mentioned we started in 1889, we started as Mitsui Kozan and were part of the old Japanese zaibatsu industrial structure. There were three main companies that supported each other: one was us, Mitsui Kozan; another was Mitsui Bank; and then the other was Mitsui & Company who were the trading company. We, Mitsui Kozan, were the one who was providing the most capital for the group at the time. By basing ourselves in coal we were able to make a huge contribution to the Japanese economy and we were at the foundation of many industries for Japan including iron, chemical processing and metal processing. While coal was the main resource supporting industry here in Japan this slowly changed, we then became reliant on importing coal due to its pricing. As a result of this, the mining industry declined and so in 2003 we had no choice but to completely shift our trajectory. At that time a US company wanted to acquire us as we were in dire straits, but we were supported then by the Japanese stakeholders Nippon Steel and Sumitomo Corporation. They provided the support that allowed us to make a turnaround in six years. Because of the spirit and technology which we had accumulated throughout our long history, we were able to maintain a steady base of business in such a short time. If you now look at our business, it is comprised of three main pillars: first is coke; next is fuel sales (refining and processing imported coal and shifting it to domestic fuel sales); and third is Chemical Machinery (powder and granular machinery etc.). A guiding principle for us is to really be able to support the Japanese industry behind the scenes and support it moving into the future.

One very interesting aspect of your company is the history of collaboration. You mentioned the relationship before with Mitsui & Company and Mitsui Bank and we know that presently your biggest shareholders are Nippon Steel and Sumitomo Corp. What are the benefits of these relationships with large companies and what sort of synergies have you been able to create between you and them?

Some of our materials are supplied to Nippon Steel in terms of our coke. As a result of coke processing there are a number of different byproducts such: as coke oven gas, tar, light oil, sulphuric acid, and liquid ammonia. These byproducts are then supplied to chemical companies. For Sumitomo Corporation we are mainly collaborating on coal imports and coke exports.

It is interesting to note that since 1993 that the chemical and machining aspect of your business was integrated into an existing traditional coke/coal-based business. Now we can see that you have two lines of business mainly the coke business and then your machinery business. Could you tell us now what line of business is your focus and which do you see as having the most future growth potential for your company?

It has been about five years since I assumed the presidency and I can share with you that the most important goal for me has been to create a sustainable management style. Up until five years ago we were heavily focused on the coke business and that represented 70% of our sales, however, I really sought to shift and reverse this due to the fact that the coke business is very turbulent and unstable and as such I have tried to create a new balance by expanding the non-coke business. This sustainable management is now steadily verging on success. Non-coke means fuel sales which includes petro-cokes, biofuels like palm oil and woodchips. Another aspect is Chemical Machinery, and another is our resource recycling machines which are able to properly reuse and eliminate byproducts for different industries. For example: recycling sludge, coal ash or waste plastic; basically, all waste management related to the business of coke and coal.

Another aspect of the non-coke business is the property business (the rental and leasing business). We rent and lease out our land for companies engaged in the solar power business etc. We have our group companies too like the Hokkaido forestry business which we established because we already had a site there that was being used for coal mining purposes. This is the portfolio of our business, but the majority of our business is still derived from our coke and coal business. Chemical Machinery is an example as we had such great experience in these fields, we were able to, for example, develop the machines that can refine and process coal that makes the chemicals needed in battery production.

We know that in Japan that the ageing population is reducing the labor force and as a result there is a shrinking pool of graduates that industry can recruit from. At the same time there is also a perception perhaps among young graduates that heavy industries have been slow in adapting to the digital age and technologies we associate with Industry Revolution 4.0. As a company involved in such heavy industries can you tell us what efforts you have been making to attract young talented graduates?

Yes, I agree it is hard to attract young people because they have a completely different mindset today. Our work is quite demanding, it is on site labor and the shift pattern is 24 hours. I believe that it is very important to provide and disseminate information about the joy of contributing to monozukuri and the pride of being able to support the Japanese economy on such a fundamental level. If we were able to convey this, I think it would have a huge effect in changing their mindset. Of course, we are making ongoing efforts to lighten the load and are introducing new machinery that automates processes on site. Another element I believe is to show such young people the future and what is possible if they went into this industry and what could be in store for them if they were to work with us. The coke business is coming to a turning point and the reason for this is that domestically the demand for it is reducing and so with the shrinkage of this market we are changing into an exporter now and in that sense, there is still great demand globally. But I believe that we can’t just rely on global exports and so we are precisely at that moment where we are looking to expand our vision to see what we else we can put forth as continue to expand and grow.

One part of this will be to address the issue of climate change and reducing the C02 emissions that are emitted into the atmosphere from coke processing. But as I mentioned it’s a circular process, so although it does emit C02 into the atmosphere there is a contribution made by this process from the different by-products it produces. We are looking to be able to add further value to this circular process that comes from coke production. One aspect is to make C02 an energy resource, to get to that stage will take time and is something long term. I believe that we can also work in field of hydrogen because coke gas is made up of 50-60% hydrogen and I think if we can efficiently extract that hydrogen, we could provide it as a very cheap fuel for industries such as steel and chemical production. From current productivity we think that we would be able to extract 200 million cubic meters of hydrogen and there are already cars that run on such fuel like the Toyota Mirai car. In that way we could actually fuel 300,000 Mirai cars through our processes. This is blue hydrogen so it’s not perfectly green but nonetheless it is a cheap alternative, and it can be produced at scale and utilized in a number of sectors such as those I mentioned. I believe that we would be able in this way to contribute to carbon neutralization. In this way we would be able to contribute to Japanese industries behind the scenes which is part of our company’s guiding principle.

Kitakyushu Coking Works

Automotive technologies are obviously something that you will be utilizing so that you can develop these new hydrogen extraction methods and if we look at the mining industry, we know that automated technologies can significantly increase productivity and safety. However, at the same time, we know that these methods allow companies to rely less on workforces which can be expensive to maintain, especially in developed countries. What though is your thoughts on the automation trend in mining and other heavy industries, do you believe that such technology is proven and capable of replacing humans? Or do you believe that companies still have a social responsibility towards their staff and maintaining their existing workforce?

Yes, especially as a company that is dealing with heavy equipment, we feel it is a must that we fully automate our processes. Especially with regards to safety we are investing and incorporating new measures so that our people can operate them safely and this is our social responsibility. For example, machinery for extracting coal as well as during the coke extraction process.

We know that you have offices in Sydney and also in California. Can you tell us more about your international strategy and how you are looking to expand your business abroad?

For our coke business we export 70% of our coke supply and it is mostly directed to Asian countries with a stronghold in Asia and India especially. Our international strategy is to expand and make this even more robust. I believe that to that end we should not be satisfied with just selling our product, but we also need to create good relationships with our clients there too. Like I described earlier we have a big responsibility to our clients, and we need to think about the entire life cycle and how we can address the entire process and provide better services through a value-added product. To this end we need to continue to deepen the relationships that we have already forged overseas, for example, by introducing our energy efficient technology. Through the deepening of such relationships, we can strengthen not only the business relationship but stabilize our business itself too.

For our Chemical Machinery we are not looking to expand that overseas. However, the companies that we do work with are expanding to China and other countries. For those countries our machinery has become the norm and the standard and so we need to maintain that, and we will continue to help them to make sure that our machinery is working well in those countries. We also believe that there is great potential for growth in China, especially for the electrical and battery related business. We are looking to create a strong supply chain for this purpose, and we are looking for a company that would be on the level of an alliance, so we could produce the battery locally as well as conducting the maintenance services we provide.

Another element is our proprietary assets. In China we see that our machines are being replicated and we are making efforts to ensure that the means by which to create our original machinery, produced because of our know, is kept it in house. These proprietary rights elements mean that we must have a base in China so we are looking to do expand there at the niche level, not at a large scale, and do so strategically and produce components there that only we can provide to that market. That is our international strategy at the moment.

It is apparent that your company is very environmentally aware because you are working in heavy industries which release toxic C02. But throughout this interview you have told us how you have a recycling business that reuses these waste products and how you are also generating materials for lithium batteries for electrical vehicles and the biomass related to your forestry. What is the role of companies such as yourself and industry in general in tackling the environmental situation that the world finds itself in now?

First of all, we definitely have a big responsibility to address this crisis. It goes without saying that coke plants must address the emission that they release. Minimizing the effects on the environment and local communities is something that is very important for our company. We were in the field of coal mining for many years and because there is a risk that water would overflow into the coal mine we used to run, we have continued to pump water out regularly. This pumped water is then distilled and then subsequently discharged into the sea with any harmful contaminants removed.

More than these standard things, what we should do as a company is to be proactive and do things that will really address the environmental issues moving forward and one aspect of that is our pursuit of hydrogen as a greener and cleaner fuel. I believe that we have a huge responsibility to change society’s view of businesses such as ours away from what is perhaps a negative view presently of the coke or coal business. We don’t want the prevailing view to be negative and we want to add value to society so that people view us in a positive light. This is not an easy task for our heavy industry, but we must work cooperatively in order to make that a reality. Otherwise, if Japan were to rely only on renewable energy, it would not be able to supply itself sufficiently to meet its energy needs and the Japanese economy, including heavy industries, would decline drastically. I think that the decline of heavy industries responsible for manufacturing would result in the death of the Japanese economy. For that reason, it is crucial we do something and now so that can create a brighter future for those who come after us.

Can you tell us what has motivated you personally to do this and how you are overcoming the headwinds and opposition both internally and externally to this transformation you are overseeing?

Before coming to this company, I was an engineer at Nippon Steel and I always savored a sense of delight in creating new things. I believe that if you are to go deep into your exploration of any field there you will find new and surprising discoveries and that has been my motto. I believe that in any process that there is nothing at the level of full completion or perfection and I live my life by this philosophy and from this perspective there is always opportunity to make improvements and something of better quality and taking on this daily is something I lead with each day. That process itself is such a joy to me and I find it very fun and, in that sense, I don’t care about the pressures internally or externally as I believe it is very important to find your own path.

The story you shared of Fujifilm is exactly the path we have taken as well. Even with Fujifilm using their base film business, they made that the driving force as the means by which to venture into other fields such as medical devices and cosmetics. In our case, the machines manufactured by the Chemical Machinery division originally started out by crushing and mixing coal, but now we have developed these machines to manufacture completely new composite materials in fields such as electronics (including battery), food, cosmetics, and pharmaceuticals. The factors that could be derived from these technologies are not just R&D, but a significant part of it is our testing facility. This allows clients to come to us like car companies, paper makers, electric components makers and food makers. We do about 600 of these inspections and this is all contributing to the cutting-edge developments that can be seen in these sectors. This inspection facility is playing a leading role for us in allowing us to collaborate with a variety of companies and how we can take their products forward and create more advanced ones. The accumulation of information in having this facility contributes to our product development because it allows us to know how to process various granular elements which then allows us to make custom made original equipment for our clients and this enhances relations with different companies and that is something that has great potential for us.

In terms of scale, how we are looking to expand is something we need to think more about. Of course, we have a limited number of employees and so we are not looking to expand by scale as I said before, but we are looking to make inroads into various niche fields that will support Japanese industries. Our name will never come out at the forefront but those in that industry who know will know it was us and I think that these efforts really contribute to the morale of our employees.

POWDER LAB: Grinding, mixing, mechanical alloying and mechanochemical experiments can be performed.