November 27, 2013 2:00 am JST

Nippon Steel, ArcelorMittal to buy US auto steel plant

TOKYO (Nikkei) -- Nippon Steel & Sumitomo Metal and ArcelorMittal will jointly acquire an automotive steel sheet plant in the U.S. from ThyssenKrupp, more than doubling the partners' combined production capacity in that country.

     The deal is expected to reach 200 billion yen ($1.95 billion). For Nippon Steel, the acquisition would be its largest ever outside Japan.

     The plant, built by ThyssenKrupp for around 360 billion yen in the state of Alabama, launched operations in 2010. Unable to secure enough customers in the U.S., the German steelmaker had been looking for a buyer for the unprofitable plant.

     Nippon Steel and ArcelorMittal will split the purchase cost evenly, with specifics to be fleshed out and announced in early December.

     The plant has an output capacity of around 2.2 million tons a year, supplying automotive and construction steel. The two companies operate a joint-venture plant in the state of Indiana that can produce around 2 million tons a year but have faced looming capacity shortages. By acquiring the state-of-the-art Alabama facility, at a relatively low price, Nippon Steel and ArcelorMittal will boost overall U.S. capacity to 4.2 million tons.

     Of this, capacity for highly durable zinc-coated steel sheet used for auto bodies and other applications will total around 1.5 million tons, or nearly 30% of U.S. demand for such types of steel.

     North American output of passenger vehicles is expected to reach 18.15 million units in 2020, according to U.S. research firm IHS Global. Increased output of high-end steel sheet by Nippon Steel and ArcelorMittal will ensure Japanese automakers a stable supply as they ramp up vehicle production in the region.