TOKYO -- Japan's JFE Steel said Thursday it will build a $270 million automotive sheet plant in Mexico -- a growing production hub for the auto industry -- with U.S. partner Nucor.
The duo will create a 50-50 joint venture to set up the facility in central Mexico's Bajio region. The plant, which will process lightweight high-tensile automotive steel sheet, will supply to such customers as Japanese automakers operating in the area. With an annual output capacity of 400,000 tons, the plant is scheduled to begin operations in 2019.
Nucor is strong in electric furnaces, which turn steel scrap into products. The JFE Holdings unit is a major provider of products made in blast furnaces, which use iron ore and coal as feedstock. Working with Nucor will allow the Japanese company to expand its product lineup to include the upscale automotive sheet turned out by electric furnaces.
While electric furnaces present surface treatment and quality management challenges, they are more cost competitive. So JFE Steel hopes the new products will win fresh supply contracts from automakers.
JFE Steel's Hiromu Oka said Nucor's strong finances and similarities in management style contributed to the decision to choose the U.S. company as a partner.
Last year, automobile production in Mexico reached a record 3,399,000 units, excluding large buses and trucks, with exports also rising to an unprecedented level. Annual output is expected to reach 5 million units in 2020, according to some estimates. Even with some fluctuations in the market, "Mexico is growing into a global production hub of cars and therefore steady growth can be expected," Oka said.
By gaining a foothold in Mexico, JFE Steel seeks to catch up with such rivals as Nippon Steel & Sumitomo Metal.
In Indonesia, JFE opened an auto sheet processing plant in January. Vietnam's first blast furnace steelworks, operated by a company partly owned by JFE, will go online this summer.
With Japanese demand for steel products seen falling off around 2020, the year of the Tokyo Olympics, the company aims to establish globally competitive operations with high-value-added products that competitors in emerging countries cannot yet offer.