OREANDA-NEWS. December 22, 2011. Kobe Steel, Ltd. has tied up with Jiangsu ALCHA Aluminium Co., Ltd., a major producer of aluminum rolled products in China, to expand its aluminum business in China. Kobe Steel and ALCHA have signed a letter of intent to establish a joint venture in Baotou, Inner Mongolia to produce and sell aluminum coil and sheet. After conducting a detailed feasibility study, both companies plan to sign the final agreement in spring 2012.

The joint venture, which is planned to be established in January 2013, is envisaged to be 80% owned by Kobe Steel and 20% by ALCHA. Capital investment is earmarked at approximately 40 billion yen. The company will produce and sell mainly aluminum coil and sheet for automobiles and beverage cans. Production capacity at the joint venture will be approximately 200,000 metric tons per year. While the company name is yet to be decided, the operation will be capitalized at 2 billion RMB (about 24 billion yen). Start-up of operations is anticipated in 2015.

With demand for aluminum sheet in China rapidly increasing in recent years, Japanese, U.S. and European customers have accelerated their push into the Chinese market. Demand for aluminum sheet for automobiles and beverage cans, which are major products at Kobe Steel, is anticipated to grow sharply in the coming years. But only a limited number of manufacturers in China can currently make these products as advanced production technology is required. To meet these needs, Kobe Steel and ALCHA plan to develop the market mainly for automotive aluminum sheet and can stock in China.

The new joint venture will produce the same high quality aluminum sheet available in Japan in an integrated operation, from melting and casting to hot rolling and cold rolling. In the hot-rolling and cold-rolling stages, the joint venture plans to install state-of-the-art equipment to produce some of the world's largest aluminum coils. In addition, Baotou in Inner Mongolia, where the plant will be constructed, is close to abundant energy resources and has a good workforce. These factors will give the joint venture a competitive edge.

Listed on the Shenzhen Stock Exchange, ALCHA is a major manufacturer of aluminum rolled products with an established business foundation. The partner companies are working on starting up the joint venture, with ALCHA assisting in equipment procurement and permitting. From this beginning, Kobe Steel and ALCHA plan to continue discussions to deepen their future alliance.

The Kobe Steel Group's overseas development in the aluminum business began with the establishment of two companies to make aluminum substrates for hard disk drives. In December 1987, Kobe Steel formed Kobe Precision Inc. in the United States. In February 1992, it established Kobe Precision Technology Sdn. Bhd. in Malaysia.
May 2003 saw the formation of Kobe Aluminum Automotive Products, LLC in Kentucky, USA to produce aluminum forgings for automotive suspensions.
In September 2010, Kobe Steel established Kobe Aluminum Automotive Products (China) Co., Ltd., which will make aluminum forgings for suspensions in China when it starts up in August 2012.

The formation of the new integrated operation with ALCHA will help meet China's rapidly rising demand for aluminum sheet. Through the joint venture, Kobe Steel aims to further increase the presence of its aluminum business in Asia.