Hyundai steel in talks with ThyssenKrupp, JFE

SEOUL/TOKYO Jan 29 (Reuters) Hyundai Steel Co., South Korea's second-biggest steel maker, said on Monday it is in talks with Japan's No.2 maker JFE Steel Co. and Germany's ThyssenKrupp to broaden ties, but no details have been set.

Hyundai Steel, a unit of Hyundai Motor Group, made the comment in response to a report in Japan's Nikkei business daily on Monday that Hyundai was in talks with the two firms to help it build a 5.24 trillion won (.58 billion) mill.

The South Korean firm has been seeking a foreign partnership for assistance to build the 7 million tonnes a year mill, planned to feed steel to its parent Hyundai Motor Co..

The Nikkei report on a possible alliance, which would mark further consolidation in the global steel industry, sent shares in JFE and Hyundai Steel higher.

JFE stock closed up 1.6 percent at 6,800 yen, compared to the 1.3 percent gain in the iron and steel subindex in Tokyo.

Hyundai Steel shares closed 1.57 percent higher at 32,400 won in Seoul.

Kang Hak-seo, senior executive vice president of Hyundai Steel, said the company is in talks with ThyssenKrupp on a possible alliance, but said: ''So far, we have no details. We need more time.'' A spokesman for ThyssenKrupp said on Monday the company is advising Hyundai Steel on how to improve its facilities.

There were no talks on taking financial stakes, he added.

Hyundai Steel and JFE Steel, the world's fourth-biggest steel maker and a core unit of JFE Holdings Inc., also said in separate statements that they are talking on expanding their existing relationship, but details have not been decided.

JFE owns 13 percent of Hyundai HYSCO, an affiliate of Hyundai Motor, supplying hot rolled coils.

The Hyundai group is said by some in the industry to have called on JFE and Nippon Steel Corp. for assistance to build the mill.

But Japanese steel makers have so far been reluctant to join the project on concerns about a leak of technology for high-grade sheet steel to rivals in Asia, the most important market for Japanese mills.

Hyundai Steel, itself part of the Hyundai Motor group, announced the plan to build the mill in October. The mill will be completed in 2011. Hyundai Steel also said it would spend another 2.3 trillion won to expand capacity to 12 million tonnes by 2015 by building another furnace.

The Japanese business daily said JFE and Hyundai will also consider holding shares in each other.

As Arcelor/Mittal merged to create the world's biggest steel maker and accelerates growth, Nippon Steel, the world's second-biggest steel maker, is pursuing a strategy to grow as it raises defences against possible hostile bids.

The Japanese company has inched up stakes in South Korea's biggest steel maker POSCO Co. and brought into the consolidated group Brazilian steel maker Usiminas late last year.

JFE has stayed away from a global alliance trend for the time being and is focused instead on strengthening its ties with a group of its Asian customers and on improving returns to shareholders.

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