Onoda Cement Co., Ltd.
Onoda Cement Co., Ltd.
Onoda City, Yamaguchi 756
Fax: (08368) 3-2011
Sales: ¥420.68 billion (US$2.93 billion)
Stock Exchanges: Tokyo Osaka Nagoya
Onoda Cement Company is the oldest and one of the largest cement companies in Japan, the country with the largest cement industry in the free world. The company’s motto is “Quality and Technology,” which emphasizes the traditional areas in which it distinguishes itself from its competitors.
The history of the Onoda Cement Company begins during Japan’s Meiji era, from 1867 to 1912. During this era, the Japanese social structure changed from feudal to Western forms through government-sponsored industrial expansion. One of the first steps taken by the Meiji government to modernize was the construction of port and harbor facilities. The first cement in Japan, imported from France in 1870, was used in the construction of piers in the port of Yokosuka. As the demand for infrastructure increased, so did the demand for cement and other imported goods. In an effort to reduce the outflow of gold and silver due to increased imports, the Meiji government began a domestic industrial development program.
Except in military industries and strategic communications systems, private concerns carried out this industrial development program. In certain industries, however, the Meiji government sponsored and constructed pilot plants. One of these industries was cement. The construction bureau of the Ministry of Finance built Japan’s first cement plant at Fukagawa, Tokyo, in 1873. Portland cement was manufactured there two years later, in 1875, the same year cement production began in the United States.
One of the crucial features of the Meiji era, the disbanding of the samurai warrior class in 1869, helped provide the financial basis for Onoda Cement Company. After their dismissal from government service, the samurai received pensions from the government that amounted to a percentage of their original salary and varied in value. After about seven years, the pensions became too expensive and were replaced with interest-bearing, nonconvertible bonds. The samurais’ incomes fell to a fraction of their original levels, and only a few of them had enough commercial experience to go to work to replace their lost incomes. At the same time, inflation due to weakened paper currency and increased government expenditures reduced the real value of their fixed holdings. Inflation later became a principal reason for the government’s decision to sell its various pilot plants.
In May 1881 at Onoda-Mura, Yamaguchi Prefecture, Junpachi Kasai founded Onoda Cement, the first privately owned cement company in Japan. A year later, in 1882, Onoda Cement purchased the government’s pilot plant at Onoda. Kasai, himself an ex-samurai warrior, led a group of samurai who pooled their pensions to capitalize the company. Kasai became one of Japan’s leading industrialists and part of a group of business leaders who helped reinforce Japan’s national integrity. Through their industrial successes, these businesspeople resisted the expansion of Western interests into Japan during a period of global colonization. During the presidency of Kasai’s son, Shinzo Kasai, between 1900 and 1930, Onoda became the largest cement firm in Japan.
Transportation is crucial to profitability in the cement industry because cement is a high-bulk, low-value good. Manufacturers maximize revenues by placing plants near either the final market or a water transportation facility, since water transport is the cheapest mode of bulk carriage. Prior to World War II, Onoda solely produced cement; it did not have its own sales and distribution network. Mitsui Bussan, a large zaibatsu, or conglomerate, was Onoda’s sales and distribution agent in both foreign and domestic markets. The relationship did not compromise Onoda’s independence. Onoda was not a subsidiary of Mitsui Bussan but rather a client of its trading services. From its founding Onoda has been proud of maintaining its corporate independence.
The firm expanded extensively before World War II, especially into China and the Japanese colony of Korea, the closest areas for increasing market size. By the beginning of the war over 60% of the firm’s assets, roughly 19 plants, were in Korea and China.
In 1924 the cement federation, Rengokai, a cartel organization, was formed to control output. The cartel set uniform curtailment rates that required cement manufacturers to limit production to 60% of capacity. Uniform production curtailment rates favored established firms over newer firms. Established firms retained older equipment, normally scrapped in a competitive environment, simply for the purpose of counting it as production capacity. Older firms could curtail production to 60% of capacity by using 100% of their new equipment and none of their older equipment. Newer firms with a higher percentage of newer equipment found that the 60% cap cut into the machinery they could use in a competitive market, putting them at a disadvantage.
The cement federation agreements covered Japan proper, the colonies, Manchukuo, and the South Seas Mandatory territories. Tensions within the cartel, intensified by the Great Depression, prompted the formation of sales associations to fix exclusive sales territories with sales quotas and standard prices. In 1932 Onoda’s Dairen factory seceded from the cartel over a dispute about Manchurian quotas. In December 1933 the cartel responded to this challenge by setting up a mechanism by which to divide markets, the Cement Exporters’ Association.
In 1934 Onoda and the Oita Company withdrew from the cartel on the grounds that the industry’s leader, the Asano Group, gained an unfair advantage from the uniform curtailment rates because it had predominantly older equipment. When the cartel lost its control it appealed to the government for intervention. In December 1934 the Minister of Commerce and Industry enforced Article 2 of Japan’s Major Industries Control Law, for the first time ever, on the cement industry. The government’s intervention forced the “outsiders” to comply with the cartel’s curtailment rates but actually did very little to control competition since the law only applied to production in Japan proper.
To get around this constraint Onoda built plants in Korea, Kwantung, and Manchukuo and supplied the home market from these sources. This move was easy to accomplish because Onoda and the other “outsiders” operated mainly in western Honshu, Kyushu, and Korea. The national and municipal governments became some of Onoda’s biggest customers, since the company now could undercut cartel prices. The cartel responded to these Onoda successes by having the Asano, Mitsubishi, and Yasuda zaibatsu set up their own colonial companies. It also secured the 1936 revision of the Major Industries Control Law, which extended the government’s control into the colonies as well. The government’s solution to the conflict was to have agents of the Rengokai and Onoda meet every three months to set prices and production limits. This arrangement lasted until the eve of World War II, at which time Onoda operated 27 plants with an annual production of 3.5 million tons.
As a result of World War II, Onoda lost 60% of its assets, or a total of 19 plants, including its foreign holdings in China and all of its then-domestic holdings in Korea. The plants left to Onoda after World War II included Ofunato, Fujiwara, Tahara, Hikone, Atetsu, Onoda, Yahata, Tsunemi, and Oita. Together with the loss of plants, Onoda lost its distribution arrangement with Mitsui Bussan when that zaibatsu was broken up by the occupation government. The new arrangement called for Onoda to operate its own domestic sales and distribution network while employing Mitsui as its foreign sales and distribution agent.
After the war Onoda president Toyoroku Ando rebuilt the business to re-emerge as the industry’s leader in Japan. Ando was a 1921 graduate of Tokyo University and a lifelong employee of Onoda. He spent his first 25 years with the company in Korea, where he rose to manage the Pyongyang factory in 1944. Ando became president in 1945 and improved the efficiency of Onoda’s production, distribution, and transportation systems. Under his direction the company began extensive diversification plans. Onoda produces or conducts research into specialized types of Portland cement, ceramics, electronics, ionics, biotechnologies, fluorochemicals, and computer systems.
Onoda began to expand outside Japan in the 1960s with a joint venture with two partners, Mitsui Bussan and Hong Leong Corporation. This joint venture, Singapore Cement, is a bulk importer of Onoda’s “Dragon Brand” cement. In 1974 Onoda set up P. T. Semen Nusantara in Indonesia to operate a cement plant at Cilacap, in central Java. Later Onoda expanded into several markets including Hong Kong, Australia, Hawaii, Malaysia, and throughout the Pacific Rim. In the late 1980s Onoda began to expand into both the Chinese and U.S. markets.
Onoda’s entry into the United States began with a joint venture with Lone Star Industries of Greenwich, Connecticut, in 1988. The $60 million operation, Lone Star Northwest, conducts business in three states, Washington, Oregon, and Alaska. The venture imports cement and manufactures concrete and aggregates—crushed stones used in making cement and in highway construction.
Onoda’s second entry into the U.S. market that year was the purchase of the CalMat Company’s cement division, California Portland Cement Company, for $310 million. CalMat is a Los Angeles-area firm dealing in sand, gravel, asphalt, concrete, and land development. The purchase included 13 ready-mix concrete plants, three cement plants, and a cement-importing terminal, and it made Onoda the largest cement producer in California. In 1989 Onoda invested in China in a joint venture with Mitsui Bussan and two Chinese firms, Huaneng Raw Material Corporation and Dalian Cement Factory. This venture, Dalian Huaneng-Onoda Cement Company, planned to construct a $150 million plant at the port of Dalian, Liaoning Province. The plant will be capable of producing 1.4 million tons of high-quality cement for export.
The company’s principal innovations include the reinforced suspension preheater (RSP), an advanced cement-manufacturing process developed in 1964 that substantially reduces the amount of energy used in the manufacture of cement. The RSP system is used in more than 20 countries and is recognized as an industry standard. The O-sepa separator is an air separation system sold worldwide. The system, developed in the late 1970s, saves electric energy and improves particle-size distribution. A third product, Bristar, is an efficient, nonexplosive demolition agent used in urban areas to minimize the traditional side effects of explosives: flying debris, noise, vibration, gas, and dust. Another innovation is Chemicolime, developed in the late 1960s. This quicklime technology, used to stabilize wet soils, was used by the U.S. military in Vietnam to strengthen jungle and marshland roads. Its contemporary uses involve construction projects near coastal regions.
Onoda operates three Japanese plants, in Ofunato, Fujiwara, and Tsukumi, and has 104 subsidiaries, all in Japan, except Onoda U.S.A., Inc. and Onoda California, Inc. The company has five product divisions. The cement-products division is the largest and accounts for about one-third of net sales. The building-materials division produces materials that complement concrete construction. The limestone and related-products division produces limestone, gypsum, slag, and specialized sands. The civil and architectural engineering division helps construct cement plants in other nations and develops applications of soil stabilizers and concrete reconditioners. The final division, the “others” division, deals in chemicals, electronics, and land management.
The history of Onoda Cement shows its industrial concentration in Japan and expansion overseas. Before World War II this industrial pattern served Japanese markets, but today it is aimed at both domestic and foreign markets. One aspect of this contemporary trend is Onoda’s expansion into the United States.
Azuma Shipping Co., Ltd. (79%); Oriental Concrete Co., Ltd. (51.8%); Onoda Chemical Industry Co., Ltd. (99.6%); Onoda Corporation; Onoda Chemico Co., Ltd. (85%); Onoda A.L.C. Co., Ltd.; Abe-Kawa Kaihatsu Co., Ltd. (99.9%); Japan Kanigen Co., Ltd. (70.2%); Nippon Gypsum Board Co., Ltd.; Onoda Engineering and Consulting Co., Ltd.; OACS Co., Ltd.; Onoda Finance Co., Ltd.; Onoda U.S.A., Inc..
Schumpeter, E.B., The Industrialization of Japan and Manchukuo, New York, Macmillan, 1940; “The Cement Industry of Japan,” Far Eastern Economic Review, August 8, 1957; Masson, R.H.P., A History of Japan, New York, The Free Press, 1972.
—John C. Bishop