Executive Briefings

Kobe Scandal Shows Cost of Race to Keep Improving Metals

Behind the scandal engulfing Kobe Steel Ltd. over the falsification of data for some of the materials it supplied is a harsh reality for Japanese steel companies: the need to provide higher and higher quality metals to compete.

Kobe Scandal Shows Cost of Race to Keep Improving Metals

Kobe Steel has rocked Japan's industrial economy with recent revelations that it faked data on the quality of some aluminum, copper and iron powder sales. Chief Executive Officer Hiroya Kawasaki said more cases could emerge as the company continues its investigations. Among those affected are automakers - among the biggest customers for steel producers - who have been seeking more advanced products to cut weight while retaining strength and versatility.

“The steelmakers are really trying to protect their turf, because this is a life-and-death situation for them,” said Thanh Ha Pham, senior vice president in Japan for investment bank Jefferies Group LLC. “It’s improve or die.”

The trade-off for carmakers between a vehicle that’s strong enough to be safe but light enough to be energy-efficient has led to an array of alloys and efforts to break the dominance of steel, from McLaren’s iconic carbon-fiber F1 supercar in the 1990s to Ford Motor Co.’s decision to switch its venerable F150 pick-up to aluminum in 2015.

While Kobe Steel’s falsified reports may be an isolated incident in the industry, Japan’s steelmakers have spent a fortune developing new types of steel and other metals to meet demands from automakers for fuel-efficiency, whether the car has a 300 kilogram petrol engine under the hood, or a 300 kilogram lithium-ion battery. About two-thirds of the weight of most vehicles is still steel.

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Kobe Steel has rocked Japan's industrial economy with recent revelations that it faked data on the quality of some aluminum, copper and iron powder sales. Chief Executive Officer Hiroya Kawasaki said more cases could emerge as the company continues its investigations. Among those affected are automakers - among the biggest customers for steel producers - who have been seeking more advanced products to cut weight while retaining strength and versatility.

“The steelmakers are really trying to protect their turf, because this is a life-and-death situation for them,” said Thanh Ha Pham, senior vice president in Japan for investment bank Jefferies Group LLC. “It’s improve or die.”

The trade-off for carmakers between a vehicle that’s strong enough to be safe but light enough to be energy-efficient has led to an array of alloys and efforts to break the dominance of steel, from McLaren’s iconic carbon-fiber F1 supercar in the 1990s to Ford Motor Co.’s decision to switch its venerable F150 pick-up to aluminum in 2015.

While Kobe Steel’s falsified reports may be an isolated incident in the industry, Japan’s steelmakers have spent a fortune developing new types of steel and other metals to meet demands from automakers for fuel-efficiency, whether the car has a 300 kilogram petrol engine under the hood, or a 300 kilogram lithium-ion battery. About two-thirds of the weight of most vehicles is still steel.

Read Full Article

Kobe Scandal Shows Cost of Race to Keep Improving Metals