Tokyo: Nippon Steel Corp., the world’s second-largest steelmaker, has started talks with Tata Steel Ltd about increasing production to meet rising automotive steel sheet demand in India.
Nippon Steel would assess the market outlook on the subcontinent before finalizing business plans, the Tokyo-based company said in a statement released on its website on Tuesday.
The Japanese steel maker’s customers such as Toyota Motor Corp., the world’s second-largest auto maker, Suzuki Motor Corp. and Honda Motor Co. are expanding in India as rising incomes boost vehicle purchases. Toyota estimates the nation’s car market will rise 38% from 2005 levels to two million vehicles by 2010.
“A low-risk, low-return approach is desirable” for Nippon Steel in India, said Michi Tsuchiya, an analyst at Meiji Dresdner Asset Management Co. in Tokyo.
The company’s shares closed up 10 yen, or 1.2%, at 873 yen on the Tokyo Stock Exchange.
Nippon Steel and Tata Steel may build a steel-sheet plant that could produce a million tonnes (mt) of steel a year, supplying sheet to India-based Japanese auto makers by 2010, the Nikkei newspaper reported. The investment would be about 50 billion yen (Rs1818.9 crore), it estimated.
Akio Mimura, president of Nippon Steel, was in India this month for an International Iron & Steel Institute meeting. Mimura met Tata Steel managing director B. Muthuraman on 23 March, said Nippon Steel spokesman Hayato Uchida, who declined to say what they discussed.
“We are in talks with Nippon Steel for joint production of steel to meet rising demand from automotive sector,” a Tata Steel spokesperson said. The two companies are in the process of finalizing the details of the venture, he added.
The company acquired British steel maker Corus Group Plc in January to become the world’s fifth-largest steel maker. Tata Steel’s annual steel output is estimated around 22-23mt.
Japanese steel makers, who followed auto makers into China to establish production ventures, have yet to build plants in India. In April 2002, Nippon Steel signed an automobile steel technology cooperation agreement with Tata Steel, and Tokyo-based Nisshin Steel Co. has said it may build a stainless steel factory in India.