Baosteel, Nippon Steel to build auto sheet line

KISARAZU, JAPAN, Nov 2 (Reuters) China's Baosteel Group Corp and Japan's Nippon Steel Corp said on Friday they would build a 450,000 tonnes-a-year automotive sheet line at their Shanghai plant by 2010, boosting output by some 50 percent.

Baosteel, Nippon Steel and ArcelorMittal had been discussing the capacity expansion at their joint venture for some time to cope with a rapid expansion in China's car market.

''We hope to raise the annual output to near 1 million tonnes as quickly as possible,'' Akio Mimura, president of Nippon Steel, the world's second-biggest steelmaker, told a news conference.

The joint venture, which started full production in 2005, already has two continuous galvanising lines for plating car sheet to protect it from corrosion, one with capacity of 450,000 tonnes a year and one of 350,000 tonnes.

Baosteel, the world's No.5 steelmaker, and Nippon Steel also said the emergence of giant ArcelorMittal last year drastically changed the market, forcing them to adjust their strategy.

''Every steelmaker should get itself ready for a realignment, or it will be taken over,'' Mimura said.

When asked if the alliance with Baosteel was to establish an axis to act as a counterweight against ArcelorMittal, Mimura said: ''That is exactly what we are doing.'' Baosteel Chairman Xu Lejiang said: ''We'll get bigger at home through acquisitions and have a reliable partner on the international market. That is our important strategy to avoid being taken over.'' Xu said the company planned to ask partner steelmakers to agree to cross-shareholdings should it list overseas.

The two firms said they aim to expand their partnership to areas such as the exploration of raw materials, protection of the environment and exchange of technology.

Japanese steelmakers, led by Nippon Steel, are accelerating investment to boost capacity and take on ArcelorMittal.

Xu was in Japan to celebrate the 30th anniversary of the relationship between Nippon Steel and Baosteel, which was founded with Nippon Steel's technical assistance based on an official request by the Chinese government.

REUTERS SR PM1704