Expanding steelmaking and forging capacity at Muroran, tilting to large nuclear forgings (2007)

The swing of the cycle is not the company's to set

When president Nagata Masahisa said in July 2005 that there would be no large capital investment, the judgement was sound as a reading of the market. His explanation — that orders would fall to their lowest level, less than half the peak — is exactly what came to pass after Fukushima. That the company nonetheless committed more than $679.3M (¥80bn) two years later appears to be because one fact looked stronger than the demand cycle: it alone could make a 600-tonne ingot. If only one firm can make the thing, the reasoning ran, whatever it adds will sell.

But that strength held only for as long as the demand existed. Being the only firm that can make something is the same as having nowhere to move the capacity when the orders stop, and the $325.2M (¥35bn) impairment of the year ended March 2016 is the reverse side of it. Once fixed cost was piled onto a business whose utilisation is set by other countries' nuclear policies, the shape of the loss was already determined. That demand returned to the same plant fifteen years later, and that the company is now adding a further ¥10bn to a ¥20bn programme, is less a proof that the decision was right than a restatement of the cycle this business runs on.