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Kobe Steel saga: No end in sight to manmade disaster

In case you missed the news, Japan’s third largest steelmaker Kobe Steel is in a bit trouble. The company has admitted to years of routinely fabricating inspection documents on many steel and metals products. It’s insisting safety and performance were never compromised, but hundreds of customers at home and abroad including Toyota Motor and Boeing are rushing to make sure. Meanwhile, the Japanese government is pondering whether any laws have been broken.

Kobe’s share price lost 40% of its value in the space of a week, prompting brokers to start predicting the 112-year-old firm’s vivisection, with No. 2 maker JFE Steel seen getting the juiciest bits. But maybe the pundits are being a touch cynical. After all, Kobe Steel has successfully ridden out a few crises in its history.

I well remember that morning in January 1995 sitting in my Tokyo office grimly enthralled as every news channel beamed live coverage of the Hanshin area of western Japan in flames. A major earthquake had struck just before dawn, devastating parts of Ashiya, Nishinomiya and Takarazuka but reserving its worst for the city of Kobe. The centerpiece of the destruction was the 630-meter elevated stretch of the Hanshin expressway which toppled over. An investigation would later expose shoddy construction, with the sea sand and gravel — not river sand — used in the concrete of the pylons, eventually corroding the steel reinforcement to useless strands.

Among the metals companies with plants in the area, the Nishinomiya works of then Kawasaki Steel (now JFE) were badly damaged. A corner of the site would soon be bulldozed level and host temporary accommodation for some of those the quake and fires had rendered homeless.

But Kobe Steel was hit the hardest. Besides its Kobe Head Office building, which was completely destroyed along with a wire rod mill and other facilities, the biggest casualty was the blast furnace. This had to be shut down with the molten pig iron still inside, a painful decision for any steel producer to make. The iron inevitably cooled to a solid lump requiring Kobe, eventually, to smash a hole in the furnace wall large enough so shovel trucks could dig the mess out.

The so-called Great Hanshin-Awaji Earthquake of January 17, 1995 resulted in Kobe Steel losing over Yen 100 billion ($890 million). I’d learn later that such was the scale of the destruction — for a while, management had considered all but abandoning the mainstay works from which the company takes its name. Instead, vital facilities would be concentrated at its Kakogawa plant, about 31 km west, where quake damage was generally confined to raw materials wharves and unloading equipment.

But earthquakes are natural disasters, unpredictable in force and location and indiscriminate in the havoc they wreak, and those who suffer are accorded our sympathy and generosity. The mayhem wrought on Kobe Steel today is entirely self-inflicted and very much manmade. As new revelations emerge almost daily about the extent of the firm’s transgressions, the pundits might be right. This could be the disaster from which Kobe does not recover.

Source: Platts & Hellenic Shipping News

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