Nippon plans talks with Mittal Steel

TOKYO: The head of Nippon Steel, the world’s third-biggest steel maker, on Thursday said the company plans to start talks with Mittal Steel about boosting their auto sheet capacity in the United States.

Akio Mimura, president of Nippon Steel, said in an interview that the company wants to resume talks with Mittal Steel as soon as possible, now that the new management of the soon-to-be merged Arcelor-Mittal has been appointed.

“We need another 500,000-tonne annual line for auto sheet steel in the United States, to keep up with strong demand from Japanese carmakers there,” Mr Mimura said. Asked when construction will begin, “it’s up to them (Mittal),” he said.

Nippon Steel and Mittal Steel have an equally-owned joint venture, I/N Kote, in Indiana. The plant already has a 500,0000-tonne annual continuous galvanising line (CGL) for plating car sheets to protect them from corrosion.

The talks, which could take place at the International Iron and Steel Institute’s annual conference in Buenos Aires in early October, come as the market watches to see how Nippon Steel and the Mittal-Arcelor group will maintain their relationship.

“In a meeting with Mittal Steel chairman Lakshmi Mittal, we agreed to begin talks about expanding our co-operative relationship,” Mr Mimura said. He declined to elaborate.

Arcelor-Mittal is three times bigger than Nippon Steel measured by output, sparking concerns that Japanese steel firms could also become foreign take-over targets. An aggressive entry into overseas markets by Toyota and other Japanese carmakers, steel firms’ top customers, has increased pressure on Nippon Steel and JFE Holdings, for increased production in the world’s leading auto markets.

Mr Mimura said the company may look at the possibility of adding a new CGL line in Thailand, where annual car production has topped 1m units and demand for its high-quality car sheet from Japanese carmakers is strong. Nippon Steel now operates plants for auto sheet steel in China, Brazil, Thailand and the US through alliances with local producers.

An increasing production of high-quality sheet steel for supply to carmakers and shipbuilders under stable year-long contracts has made Japanese steel firms more resilient to market swings, though their product prices remain lower than the international standards.

Nippon Steel’s profit fell 19.6% in April-June from last year when a rise in the value of inventories gave earnings a temporary boost. But excluding this special factor, profit rose 8.8%.

Its closest Asian rival, South Korea’s Posco, which relies more on commodity-grade products, suffered a 44% fall in profit during the same period this year.