Nisshin to decide on India plant by year-end

TOKYO, Jan 17 (Reuters) Nisshin Steel Co. , Japan's fifth-biggest steel maker, plans to finish a feasibility study on a stainless steel plant in India by the end of this year, its chief executive said on Wednesday.

CEO Yoshikazu Tsuda said Nisshin had been researching whether to set up a stainless steel plant in India together with Spain's Acerinox since last year.

''We hope to make a decision by the end of this year,'' he told Reuters in an interview. ''India's stainless market has big potential.'' The two firms are exploring options ranging from forming an integrated plant to setting up a processing or cold-roll steel plant, but nothing has been decided, he said.

Tsuda said a surge in Acerinox' share price derailed Nisshin's plan to boost its stake in the world's second-biggest stainless steel manufacturer from currently 11.09 percent.

''Their stock price is now too high. Instead of raising the stake, using the funds for strengthening business ties with the Spanish partner is one option,'' he said.

Tsuda said sharp falls in zinc and nickel prices, key raw materials for the company's sheet steel and stainless steel, are unlikely in 2007 as demand remains strong in China while the levels of inventories stay low.

''The nickel market, for instance, is tight and I don't see big fluctuations in the metal prices at least for the time being,'' he said. ''I expect our earnings to stay relatively solid in the next business year.'' Nisshin is struggling to transfer high raw materials costs on to its product prices after nickel and zinc prices nearly doubled last year. Nisshin relies on large-lot contract clients, who do not employ surcharge systems, for some 60 percent of its sales.

Nisshin expects its pretax recurring profit to fall 26 percent to 47 billion yen (9 million) in the year to March 2007, hit by sharp increases in raw material costs.

First-half profit plunged 45 percent year-on-year.

A series of strikes, project delays and cost over-runs at nickel businesses around the world, coupled with strong demand from stainless steel makers, has more than doubled prices of nickel over the past 12 months.

Nickel for delivery in three months hovered above ,400 per tonne on Wednesday. The metal hit a new high of ,950 per tonne on the London Metal Exchange on Dec. 15.

Profit at Ningbo Baoxin Stainless Steel, Nisshin's stainless joint venture in China with Baoshan Iron&Steel Co Ltd , may have topped the target of 1 billion yen in 2006, Tsuda said.

The joint venture posted a 10 billion yen pretax recurring loss hit by oversupply in China.

REUTERS PV BD1314