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Kobe scandal shakes Japanese steel industry

12 Oct 2017, 10.06 am GMT

Kobe scandal shakes Japanese steel industry

Singapore, 12 October (Argus) — A scandal at Japan's Kobe Steel over the quality of its products expanded to the ferrous sector yesterday, as the company admitted to using falsified data to supply steel powder used in auto parts manufacturing.

The country's third largest steel producer, Kobe Steel said it shipped 140t of steel powder with falsified compact density from its Takasago works facility in fiscal year 2016. The company also admitted to shipping more than 40,000t of copper and aluminium products that did not comply with product specifications.

"Causing this serious matter has brought overwhelming shame to the company," Kobe Steel said, but added that "as the steel powder outside the specifications is on the high-quality side, the effect on product performance is believed to be low".

Japanese automakers Honda, Nissan and Toyota and other customers including aircraft manufacturer Boeing and Central Japan Railway said they were checking the quality of products sourced from Kobe Steel.

But steel and steel feedstocks market participants say damage from the scandal has been limited to reputation and has not led to any shifts in buying patterns.

"The company is on fire now and it is a major blow to basic manufacturing in Japan," a Japanese coking coal trader said. "Since they were selling to so many well-known auto and aircraft manufacturers, it looks very bad for them."

The scandal wiped out about a third of Kobe Steel's stock market value or $1.5bn this week, but there is growing risk that the reputation of the wider Japanese steel industry could suffer.

"This scandal is a very big problem for the steel industry in Japan," an official at another Japanese steel producer said. "The accuracy of the quality specifications given is very important for the various manufacturers who use their steel products. It is likely that Kobe Steel might lose some trust from their customers and maybe even lose some business from now."

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