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Thursday, 7 March, 2002, 08:18 GMT
Japanese steel firm sinks deep into red
National Steel plant in Michigan
Heavy losses at National Steel have hamstrung NKK
Japanese steel giant NKK is expecting to sink deep into the red this year after its US subsidiary, National Steel, declared itself bankrupt.

National's decision to seek protection from creditors came within 24 hours of the US move to slap tariffs on foreign steel.

But National said it would continue merger talks with rival US Steel.

NKK itself is merging with Kawasaki Steel later this year to produce what will be Japan's biggest steelmaker.

NKK expects losses for the year to the end of March to hit 74bn yen ($573m; 401m), more than five times the level previously forecast.

Heavy weight

The burden of National is playing a large part in the poor performance.

Ever since taking a stake in 1984, and seizing 53% control of the company in 1990, NKK has poured money into its rickety US unit.

"We offered them financial support of $100m last year," said NKK vice president Cho Otani.

"Since then conditions have got even worse, and it was not in the best interest of NKK or our shareholders to try to aid them again."

Now NKK has written off its entire $540m investment.

Slow to change

National is an archetypal example of the problems which have led President George W Bush to invite international ire by pulling down the shutters on steel imports into the US.

It is groaning under the weight of expensive staff costs, huge pension liabilities, and has failed to take the painful cost-cutting decisions which have seen jobs evaporate at competitors such as Anglo-Dutch combine Corus.

Massive global overcapacity is also a problem, a factor which means that of Japan's six biggest steelmakers, four have now admitted to growing losses for the current year.

That means all steel producers around the world are suffering, adding to anger about the US move.

Standing alone

The US has insisted that unfair foreign competition from companies benefiting from government subsidies needs to be stopped.

But those hit by the tariffs are contemptuous of this stance.

Since steelmakers worldwide are suffering, and in many countries made far greater efforts to restructure, the US move is merely protectionism, they say.

Malaysia's prime minister, Mahathir Mohamad, told a conference that the US move "denies the commitment to free trade".

Everyone was facing temptation to protect their own industries, but only the US had caved in to it, he said, warning that America could suffer as a result.

"If you try to protect yourself too much, you will find that your access to other countries might be affected," he said.

See also:

06 Mar 02 | Business
South Africa cheers US steel tariffs
06 Mar 02 | Business
Trade war looms over steel dispute
06 Mar 02 | Business
Steel sector stares into the abyss
06 Mar 02 | Business
Steel producers attack US tariffs
05 Mar 02 | Business
US steel tariffs anger allies
05 Mar 02 | Business
Q&A: World steel dispute
10 Dec 01 | Business
Steel firms mull merger to survive
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