TOKYO -- JFE Steel will establish a Myanmar production center for high-grade steel sheet in 2020, anticipating rising demand for such value-added goods in a fast-growing market where urban development and foreign investment are expanding.
The steel will be produced for construction, with annual capacity reaching 180,000 tons. Investment totaling roughly 10 billion yen ($88.4 million) is expected. JFE Steel and JFE Shoji -- both units of JFE Holdings -- will invest a total of 50% in a holding company to be set up this year, while Marubeni-Itochu Steel and Hanwa contribute 15% each. Steel venture Meranti Singapore is in talks to invest the remaining 20%.
The factory will be the first for top-grade steel sheet built by an overseas maker in Myanmar, where the economy continues to grow around 7% annually. Construction will begin in early 2018 at the Thilawa Special Economic Zone outside Yangon. The plant will carry hot-dip galvanizing equipment to protect the product from corrosion, and JFE Steel also will install coating equipment.
JFE Steel plans to achieve full operation quickly and will consider adding more equipment should demand grow. The Japanese steelmaker expects local production to slash lead times by about one-third, to just one month. It also plans a local service center.
Myanmar's domestic market of steel sheet for construction now totals just 300,000 tons yearly, but it should hit 1 million tons by 2025 as foreign companies build factories and urban development proceeds. The country currently relies on imports from South Korea, Taiwan and elsewhere. Top-grade sheet steel increasingly is used for roofs, walls and more in factories due to its corrosion resistance in the humid climate, and demand also is growing as a material for housing roofs as incomes rise.
The new plant probably will use blast furnace material from Japan and Southeast Asia. Suppliers will be chosen going forward.
Japanese steelmakers are expanding investment across Southeast Asia. Besides establishing a joint venture with a Vietnamese general contractor to support sales of high-grade construction materials this year, JFE Steel invested 5% -- about 27 billion yen -- in Vietnam's first integrated steelworks, which came online in May.
In July, Nippon Steel & Sumitomo Metal and a state-run Indonesian steelmaker began operations at a jointly built factory that produces sheet steel for automobiles.