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Nippon Steel eyes factory in China
By Alex Frew McMillan
HONG KONG, China (CNN) -- Japan's largest steelmaker, Nippon Steel Co., confirmed Wednesday it is in talks on a deal to build a factory in China with Shanghai Baoshan Iron & Steel Co. "It is true we are in talks with Shanghai Baoshan, but at this point nothing final has been decided," the Japanese company said in a statement. According to the Nihon Keizai Shimbun, Shanghai Baoshan, China's largest steel company, is due to sign a formal agreement on the plant with Nippon Steel as early as this year. The two plan to invest around 8 billion yuan (just under $1 billion) in a factory to produce sheet steel for cars, the Nikkei states. The Shanghai plant is slated to start production by the middle of 2005. "We are negotiating with Nippon Steel to make this into a joint business incorporating the management and operation of the factory as well," Xie Qihua, president of Shanghai Baosteel Group Corp., Shanghai Baoshan's parent, told the Nikkei. Ownership stake discussedNippon Steel is also discussing taking an ownership stake of 30 to 40 percent in Shanghai Baoshan. The two companies, which have cooperated since 1978, are also likely to partner on buying raw materials. The deal would be China's largest project in the steel industry, which is expected to boom as Japanese and European carmakers shift production to low-cost China. It would also be the first cooperative venture between a Japanese and a Chinese steel company. Nearly all of China's steel goes for domestic use. China is expected to introduce formal curbs on steel imports soon, so a plant in China would give Nippon Steel an edge over competitors such as JFE Holdings, parent of NKK and Kawasaki Steel. Some steel specially made for carsThe proposed factory would have a total capacity of around 1.8 million tons of sheet steel a year, with some of it zinc coated for use in car bodies. Around a quarter of the total production would be designed for use in automobiles, with the rest going for use in construction and for making appliances. Nippon Steel ranks third in world steel output, while Shanghai Baoshan ranks fifth. It recently won its first order from the Shanghai arm of U.S. carmaker General Motors Corp. Japanese car companies such as Toyota Motor Corp. and Nissan Motor Co. are expanding production in China and have been asking Nippon Steel to supply them with sheet steel. Stock higherNippon Steel shares are up 1.47 percent at 138 yen on Wednesday afternoon, on a day the Nikkei average is down 0.25 percent. Baoshan Steel shares, open only to Chinese investors, are flat, down 0.07 percent at 4.25 yuan in Shanghai. Japan's steelmakers put voluntary curbs on their exports to China in October, to appease the Chinese government. (Full story) China put emergency restrictions on steel imports in July and is mulling imposing full curbs. Japan accounts for 20 percent of China's steel imports.
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