Nippon Steel to end autosheet JV with Baosteel
In a statement issued late Tuesday, Nippon Steel said the two companies had agreed that Nippon Steel would sell its 50% holding to Baosteel, "subject to receipt of regulatory approvals and other closing conditions." Nippon Steel made no comment about its financial gain from the sale but in its official statement issued at the same time, Baosteel said it will acquire the Japanese mill's share for Yuan 1.758 billion ($241.65 million). After the deal, BNA will be a wholly-owned subsidiary of Baosteel.
Established in Baosteel's Shanghai works in 2004, BNA has a production capacity for cold-rolled sheets and hot-dip galvanized steel sheets for automotive use of 2.62 million tonnes/year and accounts for about 70% of the Nippon Steel Group's steel production capacity in China of 3.6 million t/y. Supply of the hot coil substrates is shared between the two firms.
Initially, the venture was named Baosteel-NSC/Arcelor Automotive Steel Sheets and for its 50% share, Baosteel would supply autosheets to Chinese carmakers, Nippon Steel would sell to Japanese-invested automakers in China for its 38% investment in the JV, and ArcelorMittal – for its 12% stake – would target mainly European car companies in China such as SAIC Volkswagen Automotive Co. Arcelor sold its share to Nippon Steel in 2011, Mysteel Global notes.
Baosteel appears relaxed about the structure of BNA ending with Nippon Steel's withdrawal, with a Baosteel official quoted in local media as saying Baosteel has a "wealth of technologies" in the area of automotive steel and has no concerns about the future development of BNA after the "breakup" of the two parties.
Baosteel says that before the agreement was about to expire, discussions had been held with the Japanese mill about extending the BNA cooperation period.
"The overall changes in the Chinese automobile industry have been quite large in recent years," a company official explained. "Both parties had discussed the issue (of industry changes and cooperation extension), but it seems that no agreement was reached in the end," Shanghai-based financial newsletter Cailian Press quoted the official as saying.
In its brief six-line statement, Nippon Steel did not elaborate on the reason for allowing the agreement to lapse. However, Japanese media reports note that in China, Japan automakers are losing their market share due to the rise of local electric vehicles.
"BNA's main customers, the Japanese automakers, continue to struggle, with the sales volume of the three major Japanese automakers Toyota Motor, Nissan Motor and Honda Motor in China in the January-June period of 2024 falling 13% on year to 1.54 million units, the third consecutive half-year decline," financial daily the Nikkei reported, noting that Mitsubishi Motors had decided to withdraw from China last year, Nissan has closed its local plant, and Honda is also inviting staff to take early retirement.
"We judged that future growth will be difficult," industry daily Tekko Shimbun quoted Nippon Steel as saying. Nippon Steel will scale back its business in China, where price competition is severe, and concentrate its management resources on the US and India where growth is expected, it noted.
Last December, Nippon Steel agreed to buy United States Steel Corp (US Steel) for about $14.1 billion, as Mysteel Global reported, but progress on finalizing the all-cash deal has encountered opposition from US lawmakers and United Steelworkers Union. Late last week, the Japanese mill confirmed that it had hired former US Secretary of State Mike Pompeo to "advise" it on the US Steel deal.
Nippon Steel insisted Tuesday that it had been considering withdrawing from BNA for the past two years – implying this pre-dated its interest in acquiring US Steel – and that even though its relationship with China's steel industry has been a focus of US opposition, this "has nothing to do with the dissolution of the joint venture," the Tekko reported.
Although Nippon Steel still has other investments in China – including WISCO-Nippon Steel Tinplate Co, its 800,000 t/y cold-rolling and tinplate manufacturing venture established in October 2011 with Wuhan Iron & Steel, now under China Baowu Steel Group – withdrawing from BNA will end its 47-year relationship with Baosteel.
In 1977, as part of China's modernization programme, the central government had identified 10 steel works projects that would host a combined 60 million t/y of crude steel capacity by 1985 and 100 million by 2000. The largest of these was to be the Baoshan Iron & Steel project in Shanghai that would host two 4,000 cu m blast furnaces which Nippon Steel had agreed to provide under a technical cooperation pact.
The two companies seem to have had a mostly amicable though arms-length relationship in the decades since. However, in October 2021 Nippon Steel filed lawsuits against Japan's largest automaker, Toyota Motor, and Baosteel alleging they had infringed its patent relating to non-grain oriented (NGO) electrical steel sheets used in motors of hybrid vehicles, as Mysteel Global reported.
Written by Russ McCulloch, russ.mcculloch@mysteel.com
Edited by Alyssa Ren, rentingting@mysteel.com
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