Tokyo: Nippon Steel Corp., the world’s second-largest steel maker, is in talks with India’s Tata Steel to jointly produce automotive sheet steel in India, the Nikkei business daily said on Tuesday, helping the company’s share price inch higher.
By 0105 GMT, Nippon Steel shares were up 1.2% at 873 yen, while the iron and steel subindex rose 0.35%.
The paper said the two companies are likely to invest about 50 billion yen (Rs1,832 crore) to build a plant with an annual capacity to produce around a million tonnes of thin sheet mainly for auto bodies by 2010.
A Nippon Steel spokesman could not immediately confirm the report.
An entry would make Nippon Steel the first big Japanese steel maker to enter the emerging market, where rivals like Arcelor Mittal and POSCO are already building large plants to tap the country’s booming car market.
The business daily said Nippon Steel President Akio Mimura had confirmed the two firms are in such negotiations.
“We are considering a wide range of joint operations with Tata Steel in India, with co-production of steel sheet for cars looking promising,” the paper quoted Mimura as saying.
Nippon Steel and Tata are expected soon to begin a feasibility study to decide on the plant’s location, the size of the production facilities and the construction start date, it said.
Demand for sheet steel in India is expected to rise further as Japanese car makers such as Suzuki Motor Corp. and Honda Motor Co. increase output there, the paper said.
An aggressive entry into overseas markets by Toyota Motor Corp. and other Japanese carmakers, steel firms’ top customers, has increased pressure on Nippon Steel and the world’s No. 4 JFE Holdings Inc. for increased production in the world’s leading auto markets.
Nippon Steel has said it is studying plans to boost output of car-use sheet steel in both the United States and China.
Mimura told Reuters in an interview last year that the company may look at the possibility of adding a new production line in Thailand, where annual car production has topped 1 million units and demand for its high-quality car sheet from Japanese carmakers is strong.
Nippon Steel, benefiting from strong worldwide 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.