A worker walks past a furnace at a Shanghai Baosteel Group factory, Jan. 15, 2007 in Shanghai, China. (Photo : Getty Images)
JFE Steel has partnered with China's biggest steelmaker, Baosteel Metal, to manufacture and sell steel powder used to manufacture car parts, in a bid to boost the Japanese company's competitiveness in the highly lucrative Chinese automobile market.
JFE Steel, a subsidiary of JFE Holdings, has entered into a 50-50 joint venture with Baosteel Metal, a unit of Baowu Steel Group. The venture is expected to begin production of externally procured premixed iron powers with copper and nickel alloy coatings by 2018, according to a report from the Nikkei Asian Review on Tuesday.
The partnership will allocate an estimated 109 million yuan ($15.7 million) to construct a factory at the outskirts of Shanghai and procure equipment to mix alloyed metals with the powder.
The Japanese company is the first to introduce to China the production of high-value steel powder for car parts such transmission gears and engine components. Combining alloys evenly to iron powder requires a high level of technology, and China has relied completely on imports.
Although the China car market has seen fluctuating demand, it shows promising mid- to long-term growth. The country is expecting its car sales to grow by five percent this year and is set to increase in parallel with the economic growth despite a slower pace in 2016.
Faced with a domestic steel market forecasted to decline after the 2020 Tokyo Olympics, JFE Holdings has been investing actively in Asian markets in recent years. Last month, the company entered into an agreement with Hanoi-based Agrimeco, Vietnam's second-largest general contractor, wherein JFE Steel will import structural steel plate, steel sheet piles, and shaped steel for Japan and sell it after processing by Agrimeco. The products are made of high-grade steel that resists corrosion to avoid competition with cheap steel from China.
Earlier this month, JFE Shoji Trade acquired a stake in Ton Dong A, a leading manufacturer of cold-rolled steel and coated products, and unveiled plans to invest in Vietnam's first blast furnace steelworks.
