Arcelor Mittal and Nippon Steel Corp have agreed to double automotive sheet capacity at their US joint venture at an estimated cost of 30 billion yen ($254 million), the Nikkei business daily reported on Monday.
L.N. Mittal and Akio Mimura, the heads of the world's No 1 and No 2 steelmakers, also agreed to expand their alliance in areas other than their US venture at a meeting in New Delhi on Sunday, the paper said. The two companies are seen adding a new 500,000 tonnes-a-year line to the Indiana plant, doubling its output capacity, to meet strong demand from Japanese automakers such as Toyota Motor Corp and Honda Motor Co, it said.
Nippon Steel spokesman Hiroshi Nakashima declined to verify the details of the report. "We have been saying that we would need more capacity in the United States to catch up with strong demand there, but the size of the investment and other details have not been decided," he said.
The paper quoted Chairman L.N. Mittal as saying Arcelor Mittal had no plans to launch any bids in Japan. It also quoted Mittal as saying Nippon Steel and Mittal's ties were very strong. The paper also said Arcelor Mittal and Nippon Steel would consider tie-ups in areas other than the United States and Europe. In Europe, Nippon Steel has supplied car steel sheet to Japanese automakers through Arcelor.
Speculation of further realignments in the global steel sector since the formation of Arcelor Mittal last year has boosted shares in Nippon Steel and the world's major steel makers.
Nippon Steel stock has gained 26 percent this year. Shares in Nippon Steel ended flat at 863 yen. The iron and steel subindex fell 0.09 percent. Nippon Steel, the biggest beneficiary of strong world-wide sales of Japanese cars, earlier this month raised its full-year forecast for the third time in six months on booming demand from carmakers and said it would post a record profit for a third straight year.
The Japanese company has been strengthening capital and business ties with its allies including South Korea's POSCO, helping it increase shipment volumes through mutual supplies of steel slabs as well as raise defences against unsolicited take-over bids.