Novelis Enters Joint Venture with Kobe Steel in South Korea (US)

Kobe Steel will partner with a major American aluminum producer to supply the Japanese company’s processing plants in China and elsewhere, bolstering output of the metal for use in automobiles as a lightweight steel alternative. The metals maker is expected to invest 30 billion yen to 40 billion yen ($263 million to $350 million) as soon as this year in a plant to be spun off as a separate entity by the South Korean unit of Novelis, the world’s No. 2 aluminum producer. Materials made there will be sent to Kobe Steel factories in China for final processing and sold to customers such as autoparts makers in that country. The plan could be announced as soon as Wednesday. Kobe Steel’s aluminum plant in Moka, Tochigi Prefecture, has supplied the Chinese factories until now. The Tochigi site will receive a roughly 20 billion yen upgrade to boost production capacity, targeted for completion in 2020. This upgrade and the South Korean tie-up together at 50 billion yen to 60 billion yen represent one of the largest investments ever by a Japanese maker of aluminum materials in processing operations. Demand for aluminum is expected to grow more than 5% annually as increasingly strict environmental regulations worldwide spur the metal’s inclusion in automobiles. Aluminum is about one-third as dense as steel, allowing cars to be roughly 50% lighter but carry the same strength. At present, the metal typically accounts for only 10% or so of a vehicle’s mass, owing to its high cost several times that of steel. But some predict the average amount of aluminum in a given vehicle could climb 60% above the 2011 level by 2025.

European and American automakers are leading the way in this regard. Ford Motor’s mainstay F-series pickup trucks now feature a body made largely of aluminum alloy. The metal is making particular strides in larger vehicles, where weight reductions yield major payoffs in terms of fuel economy.

Kobe Steel is Japan’s third-largest steelmaker, behind Nippon Steel & Sumitomo Metal and JFE Holdings. The manufacturer, looking to make the most of its nonferrous-metals business, is looking to strengthen its operations in nonferrous materials such as aluminum.

Novelis and compatriot Alcoa lead the world in aluminum materials, each commanding a market share topping 10%. Japan’s UACJ ranks a distant third, with around 5%, and Kobe Steel follows far behind.

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