Sumitomo Metal Industries Ltd, Japan's third-largest steelmaker, and Taiwan's China Steel Corp (中鋼) said they have suspended plans for a venture to make auto steel in China on profit concerns.
"We're shelving plans to bring steel from Japan to make into auto steel as we realized it isn't going to be profitable," Sumitomo Metal President Hiroshi Shimozuma said on Wednesday.
Sumitomo Metal and China Steel had wanted to start the auto-steel venture in China to cater to surging demand for steel from carmakers there.
The venture would also have helped the strengthened ties between the two companies. China Steel owns a one-third stake in Sumitomo Metal's Wakayama mill and will buy 1.8 million tonnes of slabs from the mill by next April.
The plan to build the auto-steel venture in China is not feasible because "there are questions of return on investment, the market and supplies from Taiwan and Japan," said China Steel vice president Chen Yuan-cheng (陳源成).
"Considering transportation and other problems, we can likely only make 300,000 tons [272,000 tonnes] of quality auto-steel from 1 million tons [900,000 tonnes] of semi-finished steel we ship," Shimozuma said. "It is difficult to make good products."
Sumitomo Metal may build hot-dip zinc-galvanizing lines at its Kashima steelworks in Japan's Ibaraki prefecture to meet increasing demand from automakers, Shimozuma said.
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