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Nippon Steel mulls raising output in China

TOKYO (Reuters) -- Nippon Steel Corp. is considering raising the automotive steel sheet output at its joint venture in Shanghai in response to strong demand from Japanese car makers, a company spokesman said today.

The joint venture, Baosteel-NSC/Arcelor Automotive Steel Sheet Co. (BNA), has been operating at full capacity as Japanese car makers like Honda Motor Co., Nissan Motor Co. and Toyota Motor Corp. which have assembly plants in the southern province of Guangzhou are stepping up production.

"Yes, it is true that we are considering raising output in China, but no details have been decided," the spokesman said.

The Nikkei business daily had earlier reported that the world's second-biggest steel maker was finalizing plans to double output of automotive sheet steel in China by 2009.

There have been strong requests from Japanese automakers operating in China to boost output, a Nippon Steel source said.

BNA, which started operation in the autumn of 2005, is 50 percent owned by Baosteel Group Corp., 38 percent by Nippon Steel and 12 percent by global steelmaker Arcelor Mittal.

Officials at Baosteel's board office said they did not have such information. Baosteel has a listed unit, Baoshan Iron and Steel.

Japanese automakers in China currently import most of their steel from Japan, citing the inferior quality of locally made products, and are keen to see domestic steel makers to set up shop and raise output in China to lower production costs.

The venture between the three steel makers is expected to invest about 50 billion yen ($420 million) for the expansion of its facility, the paper said.

BNA plans to add new production lines to double annual output capacity of galvanized steel for automakers to 1.6 million tonnes by 2009, the newspaper said.

The three companies are discussing details and are expected to reach an agreement by the end of March, it said.

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