JFE Steel Corp. plans to construct a blast furnace in China in a joint project with a local company to build an integrated steelworks that could exceed 100 billion yen in value, company sources said Wednesday.
JFE Steel, part of JFE Holdings Inc. and the world’s fourth-largest crude steel producer in 2003, will construct an integrated steelworks with the state-owned Guangzhou Iron & Steel Enterprises Group, the sources said.
The project, the first overseas blast furnace to be built by a Japanese steelmaker since World War II, will supply steel sheet to Japanese automakers that have begun production in China amid the rapidly increasing demand there for automobiles, they said.
The details of the project, such as the investment ratio, production scale and the date for building the blast furnace, will be determined after a yearlong feasibility study, the sources said.
JFE Steel said Wednesday it has reached an agreement with Guangzhou Iron & Steel to conduct the feasibility study, but added that nothing specific, including JFE’s participation in the proposed investment, has been decided.
JFE Steel’s game plan is in contrast with Nippon Steel Corp., Japan’s largest crude steel producer. Nippon Steel is taking a cautious stance on fresh investments in Japan and abroad.
Sheet metal for automobiles must be of high quality, and Japanese automakers operating in China depend largely on imports from Japan. JFE Steel’s move appears to be in response to strong calls from Honda Motor Co. and Nissan Motor Co.
“There is a huge demand for high-quality steel sheets in China and we believe the country offers an excellent business environment in light of plant location and market,” a JFE Steel official said.
JFE Steel and Guangzhou Iron & Steel Enterprises launched a joint venture in Guangzhou in December to produce 400,000 tons of plated sheet metal to be used in auto bodies per year beginning around April 2006.
Building of the blast furnace, which will melt iron ore to produce highly pure iron, would elevate the collaboration between the two companies to a full partnership, the sources said.