The New No. 3 in Steel

Even in the age of the atom, steel is still the vital measure of industrial might. The Soviet Union has made it national policy to catch up with U.S. steel production, the world's largest, and the other large steel producing nations never cease jockeying for advantage. Since World War II, no nation has reached for big steel status with more success than Japan, whose industry is among the world's most advanced and whose exports have raised the ire of competitors in both the U.S. and Europe. Now Japan has taken over from West Germany as the world's third largest producer, having turned out 34 million tons of high quality steel in the fiscal year that ended in March v. 33 million tons for the Germans.

From southern Kyushu to northern Honshu, the classic brush-painting coastline of Japan has been transformed into dynamic montages of modern wealth. Fire and smoke belch forth from towering blast furnaces that gobble up a steady stream of coal, iron ore and limestone from huge supertankers. The Japanese take second place to no one as owners of the most modern steelmaking equipment, have 14 ore-to-ingot plants operating at nearly 95% of capacity and another four being built. Japan ranks second to the U.S. in up-to-date strip-mill capacity and produces 38% of its steel by the speedy, economical oxygen process, while only 10% of U.S. steel is made that way.

Unexpected Boom. The American occupation triggered the modernization of Japan's steelmaking. Occupation planners declared the steel industry essential, thus enabling it to progress from a complete halt in production on V-J day to an output of 6,000,000 tons by 1951, when the peace treaty was signed. At the same time, the old government monopoly, Japan Steel & Iron Co., was broken up into Yawata Iron & Steel Co. and Fuji Iron & Steel Co., currently Japan's two largest producers. Encouraged by the authorities, competition flourished; today Japan has 62 steelmakers. But 55% of production is still accounted for by the nation's big four, who are rounded out by Nihon Kokan and Kawasaki Steel.

The man who took the lead in advocating modernization is now the acknowledged leader of the Japanese steel industry: Shigeo Nagano, 64, Fuji's president. The son of a Buddhist priest and himself a Judo expert with a reputation for forcefulness, Nagano pressed for renovation and expansion of the industry despite official reluctance and occasional opposition from financial circles, who could not see so clearly as he the role steel would play in reconstruction. Following his lead, the industry inaugurated a $358 million, five-year capital expansion program in 1951. Japan's accelerated recovery, and the shipbuilding and railroad booms it brought, dwarfed even the most optimistic projections. Steelmen put $1.9 billion into a second five-year plan that doubled production, and in 1961 launched a third plan that will cost $3 billion, bring production to 42 million tons by the end of 1966.

Japan's biggest advantage has always been cheap labor, and productivity has risen so much faster than wages that the advantage has actually been increased. Since Japan had to import most of her raw materials, she built her big steel plants right on the water's edge. Now nearly all major steelmaking countries have to import substantial raw materials also, and Japan's seaside plants represent big savings in transportation charges, enabling steelmen to unload raw materials from giant-volume supertankers. The Japanese have also perfected their research and development, have improved efficiency and fuel use so much that the amount of coking coal used to produce one ton of pig iron has been cut 39% in ten years.

Long-Range Goal. Finished steel products are Japan's biggest export ($759 million in 1963) and nicely balance the outlay the Japanese must make to import raw materials; all exports of steel goods thus contribute directly to Japan's trade balance. Japanese steelmakers have been accused of dumping in the U.S. and of planning a cartel with Europe's steelmen, and there is no doubt that they are aggressive and wily exporters. But they insist that their long-range goal is not more exports but increased domestic consumption. Says Fuji's Nagano: "The primary object of this industry is to provide the steel needed for Japan's growing economy." Japan's per capita steel production is only 550 Ibs. annually, about half of European and U.S. consumption. Nagano reasons that Japan could comfortably produce nearly twice as much steel for domestic consumption alone.

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