JFE Steel will team up with the biggest steelmaker in China, Baosteel Metal, to sell steel powder used to create car parts, a move to boost the Japanese company's competitiveness in the Chinese automarket, Nikkei Asian Review reported.
JFE Steel, which is a subsidiary of JFE Holdings, entered in a 50-50 joint venture with China's Baosteel Metal, a unit of Baowu Steel Group. The joint venture will start manufacturing premixed iron powders uniformly coated with copper and nickel alloys starting 2018.
The partnership will allocate an estimated $15.7 million to build a factory in Shanghai. The facility will include equipment that will mix alloyed metals with externally procured iron powder.
The Japanese firm is the first to introduce the production of iron powder to China. Because mixing alloy evenly with iron powder needs a high level of technology, China has relied heavily on imports.
Alloyed steel powders are placed on molds and used to make automotive items like transmission gears and engine parts. China's car market is showing a promising mid- to long-term demand, although it has witnessed fluctuating demands.
China is expecting its car sales to grow by 5 percent this year and to increase in parallel with economic growth, despite experiencing a sluggish 2016.
Meanwhile, JFE Steel also made a move and tapped the Vietnamese market. Last month, the company moved to expand its sales of construction materials in the country.
JFE Steel also made a 50-50 venture with Hanoi-based Agrimeco, the second largest contractor in Vietnam. The partnership will import structural steel plate, steel sheet piles, and shaped steel from Japan, selling the materials after processing by Agrimeco.
To avoid competing with China's cheap steel, JFE Holdings will sell high-grade products that resist corrosion.
Vietnam usually use concrete for construction, but demand for steel has increased recently. The country consumes an estimated 18 million tons of steel every year, and at least 50 percent of which is allocated for construction. The market for high-grade steel construction materials is forecasted to almost triple in 2025.