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TOKYO, Aug 9 (Reuters) Nippon Steel Corp. unveiled an $8.4 billion capacity expansion plan at its Brazilian affiliate Usiminas on Thursday as the world's No.2 steel maker shifted gears to growth to narrow the gap with Arcelor Mittal.

The aggressive investment plan, which calls for building two new blast furnaces and boosting crude steel output by at least a quarter by the early 2010s, would put Nippon Steel ahead of a pack of rivals planning to move into Brazil, analysts say.

''That's a huge investment. That would make rivals like POSCO, Bao Steel and Arcelor Mittal who are considering a small mill in Brazil to have second thoughts about their plans,'' said Takashi Murata, analyst at Daiwa Institute of Research.

Nippon Steel said its 23 percent-owned affiliate Usiminas, or Usina Siderurgica do Minas Gerais SA, will shell out $5.7 billion to build a new blast furnace and expand existing capacities of hot rolled steel, thick plate, thin plate and galvanizing lines by 2011.

Total crude steel output will be lifted to 11 million tonnes a year, up from the current 8.8 million tonnes.

Usiminas separately plans a $2.7 billion outlay to build another blast furnace and a 3 million-tonne-a year steel plant.

The plant will likely be built in the early 2010s, but details have not been decided, the company said.

Usiminas is to finance the deal using its own cash and loans.

Nippon Steel said the investment is aimed to capture expected strong growth in demand for high-end automobile sheet steel in Brazil, and will also ease its own supply shortage of crude steel.

''With the capacity expansion plan, Usiminas can tap demand at home. Nippon Steel will also explore possibilities of using Usiminas' crude steel,'' Kiichiroh Masuda told a news conference.

''Usiminas is an integral part of our growth strategy,'' he said.

Nippon Steel is keen to raise the group's output capacities and step up cross-holdings with its allies to narrow the gap with the newly created steel giant Arcelor Mittal, which is about three times the size of the Japanese company.

President Akio Mimura has said the company would bolster crude steel output to more than 40 million tonnes by 2010 to ''restore a balance'' in the global steel sector.

Many global steel giants are considering investments in Brazil -- which is grouped with India, China and Russia in the so-called BRIC major emerging market nations -- due to its growth potential, abundant iron ore supplies and the proximity to the U.S. market, where Japanese carmakers are boosting output.

''It's one of few countries from where Japanese steelmakers can sell their products to the U.S. with only very small taxes,'' Murata of Daiwa said.

In March, Sumitomo Metal Industries Ltd., Japan's third-biggest steelmaker, and France' Vallourec announced plans to invest about $1.6 billion to build an integrated steel mill in Brazil to meet growing demand for seamless pipes used in gas and oil projects. That would make Sumitomo the first Japanese company to build an integrated mill outside Japan.

REUTERS DKS DS1501