1. Case Study: Japan’s Iron and Steel Industry
Industrial inertia
Case Study: Japan’s Iron and Steel Industry

2. Japan’s steel ind. - an overview
rapid development in the last 30 years
increased 10 times from
2nd largest steel producer in the world
leading steel exporter

3. Processes of steel production

4. Pre-war steel centres Kamaishi (釜石) Kitakyushu (北九州) Muroran (室蘭)
located near coalfields
raw-material oriented
coastal locations

5. Post-war agglomeration
Osaka-Kobe area (大阪神戶)
Tokyo-Yokohama area (東京橫濱)
Fukuyama (福山)
Nagoya (名古屋)
Manufacturing belt
market-oriented
coastal location

6. Reasons for industrial agglomeration
change from raw-material oriented to market-oriented
past – near coalfields but now – near markets
attracted by coastal locations
And large conurbations due to supply of scrap metal and labour
Therefore, they cluster along Manufacturing Belt

7. Reasons for indsutrial relocation
integrated steel plants
need a lot of flat land (space-demanding)
which is available near coastal areas by reclamation

8. Reasons for indsutrial relocation
declining supply of local coal and iron ore
ports enable import of raw materials

9. Reasons for indsutrial relocation
coastal locations have deep water ports and good port facilities
bulk carriers can be used
to reduce transport cost

10. Iron and Steel Plant in Kyushu

11. Transporting RM in Kyushu

12. Iron and Steel Plant in Kyushu

13. Reasons for indsutrial relocation
large local and overseas markets
freight rate of products > raw materials
therefore, market-orientation is preferable

14. Reasons for indsutrial relocation
steel-using industries / industrial linkages
found in Manufacturing Belt
ship-building/car industries
Enjoys agglomeration economies

15. Reasons for indsutrial relocation
large cities can provide scrap metal
can replace pig iron

16. Will all factories move to new locations? Why?No
Some firms or particular groups of industries tend to remain in an existing location (non-optimal sites) after the original factors for their location have weakened or disappeared.
Sometimes, the locations were more favourable in the past than they are now.
This is called industrial inertia.

17. Why do the firms stay in original locations?
They don’t move because there are still favourable factors of the present location.
Can you list some?

18. Favourable factors of the present location
Physical infrastructure, e.g. roads, water and electricity supplies, are present.
Ancillary services are available.
A pool of skilled labour is available.
The firms need to be near to existing market.
The firms need to maintain existing linkages with other firms (with long established business relations)

19. Why do the firms stay in original locations?
Taking risks to move to new locations
Possible problems encountered in new locations
Can you list some?

20. Possible problems encountered in the new locations
At the new sites, personal ties and linkages with the original industrial network may break down.
At the new locations, the cost and time of training new labour are needed.
There are risks and uncertainties in the new production environments. Knowledge about new regions is not so perfect.
There are diseconomies of disinvestment, e.g. high cost will be involved in moving bulky capital equipment.

21. But what happens to other firms which do not move?
2 possible outcomes:
Close down of factories  urban decay
Industrial inertia  re-industrialization

22. How can industrial regions manage to survive?
contraction of business
downsizing the workforce
closure of inefficient plants
restructuring by adaptation of existing industries in situ, introducing more efficient production methods
developing new industries/new products
movement towards specialization of products