KIMITSU, Japan (Reuters) - Sparks fly and a wall of heat hits you as 300 tonnes of molten iron pour from a huge bucket into a furnace amid wailing sirens at Nippon Steel Corp's Kimitsu plant near Tokyo.
Elsewhere in the factory, a red-hot thick plate of steel slides along a production line below an elevated walkway. A protective jacket and helmet are supplied, but you still get toasted as you walk across.
High temperatures are the norm in a steel mill, but Nippon Steel, the world's second-largest steel maker, is more worried about another kind of heat.
"The common concern of top executives at steelmakers is how to avoid being taken over," Akio Mimura, president of Nippon Steel, told Reuters in an interview in December.
The company knows how to pour, pound and roll high-quality steel, but big rivals are catching up and there is a constant battle for customers as the world splits into two or three large steel groups.
"In a world where 50 to 60 million tonne a year mills are becoming common, everybody knows that size matters," Mimura said.
Nippon Steel may be No. 2 in the world, but it lags far behind world leader ArcelorMittal. Born in 2006 through the merger of two firms whose name it combines, ArcelorMittal produces 118 million tonnes of steel a year and is three times the size of Nippon Steel, which suddenly feels vulnerable to a takeover.
Adding to the heat are skyrocketing iron ore prices and mining giant BHP Billiton's $147 billion takeover bid for rival Rio Tinto, which threatens to squeeze steelmakers' margins.
Nippon Steel already faces a 65 percent jump in iron ore price this year and skyrocketing prices of coking coal, freight and alloys, although it expects that strong demand for Japanese ships and cars will allow it to pass on most of the higher costs.
Nippon Steel has hardly had a moment's peace since its birth in 1970 in a merger of two Japanese firms, Yawata Steel and Fuji Steel.
In the late 1980s, its home currency, the yen, doubled in value in the midst of a 30-year-long flat patch for global steel demand. Nippon Steel slashed its work force by three-fourths and shut four of its 13 blast furnaces.
The 21st century brought another challenge as automaker Nissan Motor Co, frustrated with buying steel from a myriad of small suppliers, demanded steep discounts and threatened to cut the number of companies it bought from.
It was tough at the time, but the pressure forged a much stronger Japanese steel industry built around five companies, with Nippon Steel staying the biggest.
Japan's dynamic car industry has played a big part in Nippon Steel's success. Its strategy has been focused on sharpening its technological edge so that carmakers and other manufacturers can't survive without its steel.
But it is now aggressively seeking growth in volume as well, as the world's fragmented steel industry consolidates into fewer, bigger groups to better negotiate with both customers and miners.
Mimura, 67, has struck deals in the past two years to build or expand automotive steel plants with partners in the United States, China, Brazil, India and Thailand -- in some cases buying shares to lock the firms together.
Collaborators include South Korea's POSCO, China's Baosteel Group, Tata Steel of India and Usiminas of Brazil. More are being eyed.
"Friendly mergers and acquisitions are one of our options." Mimura said. "We need to further expand into overseas markets if we are to seek growth."
Japanese steelmakers enjoy booming demand from car and ship building industries and from a seemingly insatiable appetite for steel in China.
With fewer, bigger steelmakers, they now have more bargaining power over big customers such as Toyota Motor Corp, No. 2 earthmoving machine maker Komatsu Ltd and machinery maker Mitsubishi Heavy Industries Ltd.
Its technological edge and close contacts with picky clients have also set high barriers for any would-be competitors.
At the Kimitsu plant, Nippon Steel's humming production lines capable of turning out 10 million tonnes a year are a showcase of its hidden know-how.
It produces new kinds of high-grade steel, such as an extremely strong but thin, soft, easy-to-form steel used in car bodies that helps cut their fuel consumption.
In the past five years, Nippon Steel's profits have grown 3.5-fold, while its share price has quadrupled.
But the heat never goes away for long. Concerns about the fallout from the U.S. subprime housing crisis and a need to buy ore from miners, rather than having its own mines, have added new pressures for Nippon Steel.
Its shares have fallen 40 percent since last July, while those of its archrival, which has its own mines, have risen 5 percent.
But analyst Takashi Murata from Daiwa Institute of Research sees opportunities for the Japanese company.
"Now that its growth strategy has been set, Nippon Steel will have a sharply higher capacity five years from now," he said.
"The market will have a different view of the company's stock when the prospect becomes clearer."
Editing by Rodney Joyce