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| OCTOBER 2004 | |
| From the CEO's Desk | |
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Everybody says that Indian steel industry is on a upswing and is certain to do well for next few years. Yes, I do agree with it but would like to add something more. First of all, we all should agree that the major force behind this 'upswing' is the surge in international prices and the 'China factor'. The Indian steel companies surely would do well as long as the international steel prices are comfortable and also the exports to China are continuing. But I feel that we should not limit our vision up to this point and do somthing which will take care of the prospects of Indian steel industry on a long term basis. The domestic demand for steel is growing at a level of around 6 to 7 % which needs to grow further. I do agree that the demand does not lie within the steel industry but the steel community can give a push by strengthening the 'Steel' brand in the lives of people. Earlier also, we have argued through this column that we need to be more visible. When one travels from Andheri to Churchgate (in Mumbai), he sees hoardings of many companies, organisations, TV channels. Not a single hoarding of a steel company !!!! Why ? Please remember, unless the common man recognises steel industry as the mother of all the industries, our propects would not change drastically. Same is true in other parts of the country or for that matter, rural areas. everybody admits that we have not yet tapped the rural market but where is the systematic plan and action ? Today also, we see houses made of clay and bullock carts made of wood ! Can JPC or INSDAG make more 'visible' efforts ? Technologically, the main hurdles before Indian steel industry are the cost of power and non availibility of metallurgical coke. I agree that many plants are coming up to convert coking coal into met coke but the point still remains that India is dependent on imports for the supply of coking coal. can we not use the steel making technology which employs non coking coal ? Can we not generate power through the process of manufacturing sponge iron ? Yes, we can ! even the experiments of using sponge iron in induction furnace are reeping encouraging results. I think more serious thought has to be given to these aspects, which can change the fundamentals of Indian steel industry. All these years, the industry was struggling and all this was seen as a luxury. Fortunately today, we have some money to put into these activities and I am sure if we spend one rupee, the industry will get ten rupees back !!! D.A.Chandekar |
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| Headlines
Kamdhenu Ispat begins production at Bengal operation SAIL net zooms 199.6% at Rs 1513 cr Sterlite to enter steel segment Ispat applies for 4 mt pellet plant in Orissa Iron ore price rise to hit producers next fiscal MMTC to divest stakes in Neelachal Ispat Govt. changes scrap import norms Jindal Steel inks MoU with Orissa Govt. HMS imports restricted at minor ports Gas supply restrictions keep steel producers in a fix Global steel under consolidation Ispat Group acquires Bulgarian steel plant Steel stockpile shot up to 450,000 tons in Vietnam Japan Sept crude steel output up 2.2% Iraq originated scrap enters into India through Iran France’s Veolia Lands in tie up with Corus LME to consider steel after plastic launch Nippon Steel to join Sumitomo’s China pipe maker JV
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Kamdhenu Ispat begins production at Bengal operation Kamdhenu Ispat Group, the leading saria maker, started operations at its Rs.120 million plant in Howrah, West Bengal. The West Bengal unit, which is the ninth unit of the company, has a capacity of producing 5,000-6,000 metric tons of steel bars. This plant would cater to the markets of West Bengal, Assam, Sikkim and other eastern states. The group is also planning to set up two more plants in Jammu and Kashmir and Gujarat with an investment of Rs.48 crore. |
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SAIL net zooms 199.6% at Rs 1513 cr Steel Authority of India Ltd. (SAIL), the country’s top steel producer, said on Friday its quarterly profit trebled, driven by strong prices and huge demand for construction and automobiles. SAIL said net profit in the three months to September totaled Rs 1513 crore ($333 million), compared with a median forecast of Rs 1390 crore in a Reuters survey of four analysts. Total income rose 33 per cent to Rs 67,894 crore. Steel demand in Indian economy, one of the world’s ten fastest growing economies, has surged as more people build homes and buy cars and motorcycles due to cheap credit and rising middle-class incomes. Analysts estimated domestic steel prices in the past quarter have risen about 30 per cent from a year ago to an average $635 per tonne. |
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Sterlite to enter steel segment Sterlite Iron and Steel Company (SISC), a subsidiary of the Bahamas-based Volcan Investments controlled by Anil Agarwal, signed a memorandum of understanding (MoU) with the Government of Orissa to set up a 5-m ton per annum steel plant in the state at an estimated cost of around Rs.125 billion, reports said. According to a company official, SISC will be independent of the Sterlite Industries India (SIIL), which is a subsidiary of Vedanta Resources Plc (Vedanta). Volcan, however, is also the promoter of Vedanta. According to company officials, the upstream projects, such as mining will be carried out by Vedanta while steel production will be carried out by SISC. Sterlite officials also said they have to hold further talks with the Orissa government to get the required mining leases in the iron ore rich region of Keonjhar, where the project is being set up. The company will require mines with reserves of around 150m tons if a 5-m ton plant has to be set up. The greenfield steel project will be designed for a capacity of 5m tons per annum of steel products, comprising both long and flat products. The project will be implemented over the next 3-4 years. The plant will be set up near Keonjhargarh district. |
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Ispat applies for 4 mt pellet plant in Orissa The Pramod Mittal-controlled Ispat Industries is looking at setting up a 4 mt pellet plant in Orissa, reports said. Ispat is the latest company to join the bandwagon of steel makers heading for Orissa. Vinod Mittal, managing director, Ispat Industries said, ‘We have applied for some mining leases in Orissa and to meet the government’s value addition norms, we have committed to set up a pellet plant. However, the details of the project have not yet been finalised.’ The company is awaiting response from the government for the mining leases, and will go ahead once the lease is obtained. The company has applied for mining leases in the Keonjhar district in Orissa. While there is no fixed amount proposed for investment divulged, analysts said that a pellet plant of 4 mt capacity could entail a capital investment up to Rs.15 billion. Ispat is undergoing a capacity expansion at its facility in Dolvi. The company is looking at increasing its capacity to 3 mt by the end of the current financial year, from 2.4 mt at present. The capacity will be further enhanced to 3.6 mt by the end of the next financial year. |
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Iron ore price rise to hit producers next fiscal Steel producers may see a boom in iron ore price next year. Domestic steel producers may feel the pinch of current rise in iron ore prices. The domestic iron ore price shot up by approx. 20 per cent from the same period of the last fiscal, even as the government has clamped down on steel price hikes. Australian iron ore mining companies, which will begin negotiations with Japanese steel mills in November, are expecting a minimum 20 per cent hike in iron ore prices for the ’05-06 contracts, said Bill Preston, general manager, Department of Industry and Resources, government of Western Australia, while addressing delegates at the ‘Indian Steel and Steel Mining Raw Materials Conference.’ As domestic mining companies follow prices set during negotiations with Japanese Steel mills, domestic iron ore consumers are unlikely to be insulated from the price hike. National Mineral Development Corporation (NMDC)’s chairman and managing director, B Ramesh Kumar, said his company will link prices to international prices, adding that domestic iron ore prices are currently lower than international prices. |
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MMTC to divest stakes in Neelachal Ispat Minerals & Metals Trading Corporation (MMTC), the state-owned trading arm, is considering divesting its stake in Orissa-based steel unit Neelachal Ispat Nigam Ltd (NINL). The company has invited expression of interests for divesting a majority stake of 51 per cent to a strategic partner, sources said. Leading private and government sector companies including the Rashtriya Ispat Nigam Ltd (RINL) have evinced interest in picking up the stake. Industry sources said the board of MMTC recently decided to formally approach the Union commerce ministry for issuing an open tender inviting up to 51 per cent equity participation in NINL. The RINL board has given its in-principle approval for sending letters of expression of interest. However, senior RINL officials said, ‘The board has given an in-principle approval for exploring the possibility of acquiring a stake in Neelachal.’ While MMTC owns a majority stake in the company, the Orissa government, through the Industrial Promotion and Investment Coporation of Orissa Ltd, owns the remaining stake with some other small stake holders. NINL has a one mt manufacturing facility, of which 6 lakh ton is for producing pig iron and the balance is for producing structurals. Sources close to the development said, ‘The NINL project was initially designed as a 2 mt unit, however, as the company has a huge debt burden, the project was led incomplete.’ |
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Govt. changes scrap import norms The Finance Ministry and the Directorate General of Foreign Trade (DGFT), had clashes over their own interest and now, it appears that they have at last buried their differences over the import policy on metallic scrap, reports said. The Revenue Department and the Department of Commerce had locked horns over the issue of stipulating 100 per cent inspection by the Customs authorities of all unshredded and loose metallic scrap imports into the country. While the DGFT had revamped the import policy on metallic scrap and dropped the 100 per cent inspection stipulation, the Central Board of Excise and Customs (CBEC) came up with new detailed procedures for clearance of imported metal scrap (both ferrous and non-ferrous). Imports of metallic ferrous ores and metal scrap during the year 2003-04 stood at Rs. 57.46 billion (Rs.50.22 billion during 2002-03). As regards the new clearance procedures, informed sources said that the CBEC has decided to divide the metal scrap imports into two categories — (1) Scrap which has already landed in India and that which has left its port of origin on or before October 25, 2004 and which has not yet been cleared from a customs port, inland container depot (ICD) or Container Freight Station (CFS). (2) Scrap, which is to be loaded for shipment to India after October 25. For the first category, the CBEC has held that the metallic scrap would be cleared after 100 per cent physical examination. Manufacturer-importers can also avail themselves of the facility of examination at their own premises. The local central excise officer can requisite the services of the local police for their advice/guidance or presence during the physical examination of the scrap. |
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Jindal Steel inks MoU with Orissa Govt. Jindal Steel and Power Ltd (JSPL) has signed a Memorandum of Understanding with the government of Orissa to set up a two mt steel plant, 80,000 ton ferro alloys plant and 200 MW captive power plant in the state, reports said. The integrated steel project will be implemented with an investment of Rs.40 billion. The company will avoid using coking coal in the proposed plant and instead use locally available coal to produce gas for making steel. The proposed project will provide gainful employment to more than 10,000 persons in Keonjhar and Angul districts of the State. The company is contemplating to increase the capacity of the proposed steel plant to six mt per annum. The investment will be raised to Rs.100 billion. The project report for the enhanced capacity will be submitted to the state government shortly. The company is at present operating a steel plant in neighbouring state of Chhattisgarh. |
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Alloy Steel Plant – a division of the largest steel producer of the country i.e. Steel Authority of India Limited – may continue its scrap import from different countries. This is worth mentioning that the government is planning to ban HMS imports due to recent findings of explosives in the imported materials. The company has emphasized that it will continue importing such scrap. This is the result of the decision taken by the ASP management some time back to import only shredded scrap iron, which rules out any possibility of importing explosive stuff. ASP solely depends on scrap iron as the only raw material. A few months back, the plant was forced to import scrap iron from Europe because of a sharp scarcity of the material in the domestic market. ASP has already imported 1,000 tons of scrap iron and is in the process of importing another 6,000 tons through the Metal & Scrap Trading Corporation Ltd. A senior ASP official said that the consignments were imported into India after following all the necessary guidelines. ‘Shredded scrap iron is a costlier material. Still, the company opted for it because it rules out all possibilities of bringing in the kind of stuff that is being experienced in several factories all over India. Moreover, the company is buying from well-known companies, whose reputations are extremely high. ASP’s capacity for liquid steel production is 246,000 tons a year and its saleable steel capacity is 187,000 tons a year. |
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HMS imports restricted at minor ports The Director-General of Foreign Trade today issued a notification banning import of any heavy melting scrap (HMS) in any of the minor ports, sources said. Though the notification will hit the revenues of minor port operators, most of which are based in Gujarat, it comes as a boon for major ports as they will be the only ones allowed to import HMS and compact shredded scrap. However, as the government has notified a stringent policy for handling of HMS, major port operators feel it will lead to delays in unloading of cargo, thus raising the usual turnaround time of a scrap-loaded ship at the ports. |
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Gas supply restrictions keep steel producers in a fix The use of gas in steel industry may be tried for the cheaper alternative. Thus, gas supply to steel industry is third in the list after fertilizer and power and this fueled steel producers vehemently especially those who were using gas as only source of fuel. They are perplexed over the government´s policy of supplying natural gas to the fertiliser and power companies on a priority basis. Barely coming out from recession caused by anti-dumping initiatives by the developed countries, the industry is facing acute problem owing to fuel supply restrictions. Of the total natural gas produced in the country 80 per cent is being supplied to the fertiliser and power sector, the remaining 20 per cent is distributed between steel, transport and other sectors. However, with increased demand for natural gas as fuel by the transportation sector, the steel industry whose requirement is roughly 6 per cent of the total production gets only 3 per cent of its share. The country produces roughly 65 million metric standard cubic meters (MMSCM) per day of natural gas, while the demand from the steel producers is roughly 4 MMSCM. Steel Ministry sources said that the companies, engaged in gas-based steel plants are crying foul over the ‘discrimination’. Further added to their woes have been a proposal to increase gas price by Rs 960 per 1000 cubic metres applicable for the steel sector. This shortage of natural gas supply is also forcing steel producer to restrict their production capacity. |
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Steel Dynamics Inc. reported its third-quarter net income climbing more than 12-fold from the same period last year, on higher steel prices and greater shipping volumes. The company’s profit rose to $114 million, or $2.01 a share, from $9.19 million, or 19 cents a share, in the same period last year. Net sales soared to $634.7 million from $254 million. Analysts polled by Thomson First Call were expecting a profit of $1.96 a share on revenue of $603.5 million. Steel Dynamics also said it expects fourth-quarter earnings in a range between $1.55 a share and $1.75 a share. Though the company expects steel prices to soften to some extent, it predicts that scrap metal prices will remain high by historical standards. The First Call target for the period is $1.82 a share. |
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Global steel under consolidation Global steel industry is likely to witness mergers and takeovers of non-integrated players, as their operational profitability is under tremendous pressure from rising prices of raw materials such as iron ore and coking coal, sources said. Ingres, a division of the rating agency, ICRA Ltd, is of the view that besides the prices of input materials, freight has also become costlier in recent times. This will possibly affect the performance of the non-integrated players. Accordingly, one may see some capacity rationalisation globally. It is, however, accepted that the fundamentals of the steel industry, in general, appear to be improving from the short- to medium-term. The rising steel prices, both in the overseas and domestic market, is playing an important role. It is felt that international steel prices would continue to remain firm for the time being. However, it is apprehended that in the long run the prices might suffer as supply of steel items in the world market may exceed demand. International steel prices (and hence the domestic steel prices) in the export markets are expected to be sustained in the near future, till the new capacities (particularly those emanating in China) further deteriorate the demand-supply balance. Regarding the performance of the Indian steel companies, the ICRA wing has advised them to try and improve their operational profitability to withstand pressure on steel prices. |
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Posco has decided to set up its 10 million tons steel plant only in India and not in Brazil as analysts were speculating. The company may switch over to other state due to lengthier government decision in clearing the proposal. The state may lose the Rs.300 billion proposed investment from the Korean giant, if it is not clearing the proposal soon. It is understood that China affect induced Posco to prefer Indian to Brazil. This is worth mentioning that India also possesses rich quantity of the best quality iron ore. The company is seeking a long-term lease with the ministry of coals and mines, to ensure steady supply of iron ore. A 10 mt steel plant would require 70 mt of iron ore. A high-level team from Posco headed by the Jeong, Tae-Hyun recently met the Steel Minister, Ram Vilas Paswan, Commerce and Industry Minister Kamal Nath and officials from the coal and mines ministry to discuss their investment proposal. The first phase will be for a 3 mt plant in Orissa. The investments will be scaled up over a period of time in more than one plant in eastern region. The company is looking for a long term presence in the country. Posco has also denied any interest in investing in the Dhamra port in Orissa. The company manufactures high quality steel at economical price and in the long run too, it wants to continue the same business. Earlier, the Orissa government had indicated that it would be willing to allow Posco to invest in the Dhamra port, that is currently being developed by the government with the participation of companies like L&T. Posco already has six steel plants in China producing around 300,000 tons annually. The company has already invested $2.5 billion in China. China is inviting Posco to invest in the country further but it opted for India instead. |
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Ispat Group acquires Bulgarian steel plant The London-based Ispat group is close to acquiring a sick steel plant in Bulgaria, reports said. Dragovest Goranov, ambassador of the Republic of Bulgaria to India said that the group’s Indian company Global Infrastructure Holding (GIHL) was negotiating with the Bulgarian company Kremikovtsi AD for the plant. ‘Final round of negotiations are underway between the Ispat group and Kremikovtsi AD, a local company, for a possible tie up,’ said Goranov. GIHL, a part of the Ispat group, is willing to invest over 300 million euro in the Bulgarian steel plant. Once the deal of 2.3 mt per annum steel plant is finalised, GIHL would see a rise in its steel production capacity to 12.3 mt. |
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Steel stockpile shot up to 450,000 tons in Vietnam Vietnamese steel producers had a reason to worry about their stockpiles in their warehouses. Owing to weak domestic sales, Vietnam’s steel suppliers have 450,000 tons of steel products stockpiled in their warehouses, an industry report said. The Trade Information Center, or TIC, under the Trade Ministry, said high prices of many steel products have discouraged demand and resulted in the stockpiling of 220,000 tons of billet steel and 230,000 tons of ingot. On average, the price for one ton of billet steel in the north of Vietnam is between VND7.6 million and VND7.8 million, up 45 per cent on year. Vietnamese traders are importing ingots at $400-$420/ton. The TIC forecast that Vietnam’s steel consumption will fall 15 per cent this year from the last year, but it didn’t provide specific figures. In the first nine months of this year, Vietnam imported 3.52 million tons of steel products, including 1.51 million tons of ingots, at a total value of $1.69 billion, a decrease of 1.1 per cent in volume but an increase of 33 per cent in value on the year, government figures show. |
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Japan Sept crude steel output up 2.2% Japan’s crude steel production rose 2.2 per cent in September from a year earlier to 9.19 million tons, the Japan Iron and Steel Federation said. However, that figure represents a 2.2 per cent drop from the previous month. For the July-September period, steel output was up 2.3 per cent on year. Of the total, production by converters rose 0.8 per cent on year to 6.69 million tons and that by electric furnaces rose 6.2 per cent to 2.50 million tons. Steelmakers continued to raise production of crude steel and hot-rolled steel, while reducing output of pig iron. Production of ordinary steel rose 2.3 per cent on year to 7.27 million tons, while specialty steel output rose 1.7 per cent on year to 1.93 million tons. |
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Iraq originated scrap enters into India through Iran Consignments of imported scrap with live shells that have popped up across the country are from Iraq, investigations by the Director-General of Foreign Trade (DGFT) have revealed. ‘The scrap originated in Iraq but was sent by road to Iran, from where it was shipped to India,’ said Ajay Shrivastava, joint director, DGFT, New Delhi, who added that action will be taken against suppliers for violating norms. According to him, it was unlikely that the suppliers and importers were unaware of what was being shipped. Live shells in one such consignment had caused a blast at a Ghaziabad factory, leading to the death of 10 workers. DGFT officials said that Lucky Metals, a scrap supplier from Dubai, circumvented the international law against shipping of metal scrap from a war zone by sending consignments by trucks to Bandar Abbas, a port in Iran. Here, the high-risk scrap was packed into shipping containers and sent to Mundra port in Gujarat. Since containers are rarely inspected—except on specific tip-offs—authorities allowed the consignments to reach scrap processors in north India. Scrap from any war-torn country requires a pre-shipment inspection certificate, saying it contained no dangerous material, said officials. There are some 23 agencies mandated to inspect the consignment and issue certificates—by moving the scrap by road to Iran, shippers have avoided this route. Shipments from other places, meanwhile, need ‘declarations’ certified by these agencies without physical inspection. But in these declarations, the consignments that arrived in India were simply tagged as ‘scrap from Iran.’ Shrivastava said suppliers also break the international law, which says that metal scrap should be compacted before packing it in containers for shipping, to avoid the risk of live shells bursting. |
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France’s Veolia Lands in tie up with Corus Veolia Environnement SA (VE), the French utility services group, has signed a new deal worth EUR78 million with Corus Packaging Plus, part of the Anglo-Dutch steel group Corus Group PLC (CGA). Under the deal, Veolia will supply CPP’s Trostre plant in south Wales with water and waste services over the next ten years, as well as build a new boiler room for the company, which makes quality rolled steels. In a statement, Veolia said the deal is the first of its kind in the UK. |
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LME to consider steel after plastic launch The London Metals Exchange will only consider the possibility of a steel futures contract once the plastics contracts have been launched and are up and running, the LME’s chief executive, Simon Heale, said. During a Tuesday night speech as part of LME Week - released to the media earlier in the day - Heale underlined the exchange’s four key roles as regulation and compliance, provision of trading technology, communication and new contract development. The LME is planning to launch two plastics contracts from May 27, 2005, to trade polypropylene and linear low-density polyethylene. “On the subject of new contracts, can I make it clear that we are only going to look again at steel once we have plastics up and running,” Heale said. “The LME has, at heart, only one function, and that function is to provide on a daily basis a set of trusted reference prices for the world of base metals which are derived from a smooth-running, well-regulated, transparent market,” Heale said. In response to market talk of consideration by the LME of emissions trading, Heale said such rumors “came as a surprise” since such a launch was not concurrent with the LME’s approach to the base-metals industry. |
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World crude steel production for the 62 countries reporting to the International Iron and Steel Institute stands at 763.0 million metric tons (mmt) for the first nine months of 2004. This is 8.7 per cent higher than for the same period of 2003. Crude steel production in the United States reached 7.8 mmt in September, a rise of 6.9 per cent compared to September 2003. For the North America region, production stands at 99.0 mmt for the first nine months of 2003, a rise of 6.7 per cent. China produced 23.8 mmt of crude steel in September. This represents a rise of 24.1 per cent compared to September 2003. YTD Chinese production stands at 194.2 mmt, 21.6 per cent higher than for the first nine months of 2003. Production for the 25 countries in the European Union is up 5.1 per cent compared to September 2003. YTD production has increased by 5.5 per cent to 144.5 mmt. Germany produced 3.9 mmt of crude steel in September, a rise of 7.4 per cent compared to the same month in 2003. Crude steel production in the CIS region stands at 83.8 mmt YTD. This represents an increase of 5.8 per cent compared to the first nine months of 2003. Production in Russia stood at 5.5 mmt in September, a rise of 7.3 per cent on the same month in 2003. Production in the Ukraine reached 3.3 mmt in September, a rise of 11.8 per cent on September 2003. |
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Nippon Steel to join Sumitomo’s China pipe maker JV Nippon Steel Corp. will invest some Y100 million in a joint venture that Sumitomo Pipe & Tube Co. and Sumitomo Corp. founded in China’s Guangzhou last November to produce steel pipes for vehicles, sources said. The investment aims at meeting the demands of Japanese automakers for automotive parts in China. After purchasing new shares to be issued by the joint venture, Nippon Steel will have a 15% equity stake in the firm, whose plant is planned to go on stream in January. The other stakes will be 51% for Sumitomo Pipe & Tube and 34% for Sumitomo Corp. |
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