SHANGHAI -- Japan's Sumitomo Corp. will set up a venture with steelmaker Baosteel and carmaker First Automotive Works to process and distribute steel for China's booming vehicle industry, a state newspaper said on Sunday.
The joint venture, with an investment of 176 million yuan ($21.26 million), could herald more tie-ups but aimed to start by providing steel processing and distribution for FAW, the country's top automaker, the Liberation Daily reported.
"As our cooperation advances, we'll look for further opportunities and perhaps set up more joint ventures," the paper quoted an unnamed Baosteel executive as saying after the three companies signed an agreement on Saturday.
Baosteel, the country's largest steel maker and the world's fifth largest, inked a separate pact with FAW, German giant Volkswagen AG's partner in China, to cooperate in steel supply and vehicle sales, the newspaper added.
It did not elaborate.
Baosteel aims to squeeze into the ranks of the world's top three steel companies by 2010, targeting sales of 150 billion yuan annually, the company said last week.
The group has a listed arm, Baoshan Iron and Steel Co., whose yuan-denominated A shares closed 0.8 percent down at 5.18 yuan in line with an overall market fall on Friday.
It has gained nearly 30 percent this year as investors bet on a steel sector boom, partly buoyed by increasing vehicle output.
Chinese car makers produced 724,200 cars over the first five months of this year, a 105 percent rise from a year earlier, official data showed.