Kobe Steel and Novelis Korea to establish joint venture

May 10, 2017

Kobe Steel, Ltd.

TOKYO, May 10, 2017 — Kobe Steel, Ltd. and Novelis Korea Limited, a wholly owned subsidiary of Novelis Inc., entered into a definitive agreement today to establish a joint venture in South Korea that will produce aluminum sheet products.

Kobe Steel plans to acquire 50 percent of the Ulsan Plant of Novelis Korea, for US$315 million (about 35 billion yen). The joint venture, to be named Ulsan Aluminum, Ltd., is anticipated to be established at the end of September 2017, when the deal is expected to close.

The joint venture will undertake production, with each parent company responsible for commercial relationships and sales. The joint venture will provide cold-rolled aluminum as a semi-finished product to Kobe Steel for use at two of its locations: the Moka Plant in Tochigi Prefecture, Japan and subsidiary Kobelco Automotive Aluminum Rolled Products (China) Co., Ltd. in Tianjin, China. Kobe Steel will be able to receive up to half of the Ulsan Plant’s production capacity of approximately 300,000 tons per year.

Against a backdrop of stricter global environmental regulations, automobile manufacturers are moving to make cars lighter, and demand for automotive aluminum panel material is anticipated to grow significantly. Anticipating growing demand in China, Kobelco Automotive Aluminum Rolled Products (China) started production of aluminum panel material in January 2016.

In Japan, demand for can stock, one of Kobe Steel’s core products, is expected to remain firm. Demand for aluminum panel material is also anticipated to expand. To meet growing demand in Japan and China for these aluminum products, Kobe Steel had been considering how to secure stable supply capacity, an important issue.

Novelis is the world leader in aluminum rolled products, and the Ulsan Plant is one of Novelis’ major production locations in Asia. The joint venture will enable Novelis to increase operational efficiencies and boost the competitiveness of the facility.

Kobe Steel’s need to secure stable supply capacity in Asia complemented Novelis’ aim to better utilize its rolling assets, leading to the definitive agreement to turn the Ulsan Plant into a joint venture.

Under its fiscal 2016-2020 medium-term management plan, Kobe Steel is pursuing initiatives for weight savings in transportation. In April 2016, Kobe Steel established Kobelco Aluminum Products & Extrusions Inc. to manufacture and sell aluminum extrusions and fabricated products in the United States. In April this year, Kobe Steel decided to further expand production at Kobe Aluminum Automotive Products, LLC, a U.S. unit that manufactures and sells aluminum forged suspension products.

The joint venture with Novelis is in line with Kobe Steel’s growth strategy. Kobe Steel is continuing to enhance its current core businesses in can stock and disk materials, while strengthening its aluminum sheet business to meet the demand for aluminum panel material in the growing Asian market.

Outline of the Joint Venture

Company name:
Ulsan Aluminum, Ltd.
President:
To be decided
To be established:
At the end of September 2017 (planned)
Business:
Production of aluminum rolled products
Location:
Ulsan, South Korea
Capitalization:
To be decided
Investment ratio:
Kobe Steel 50%, Novelis 50%
Production capacity:
Approximately 300,000 tons per year
(Kobe Steel has offtake rights to receive up to 50% of the capacity.)
Main equipment:
Melting and casting line, hot rolling line, cold rolling equipment, other
Employees:
About 600

Outline of Novelis

Company name:
Novelis Inc.
President and Chief Executive Officer:
Steve Fisher
Established:
2005
Location:
Atlanta, Georgia, USA
Parent company & ownership ratio:
100% owned by Hindalco Industries Limited
Consolidated sales:
US$10 billion (year ended March 2016)
Employees:
Approximately 12,000
Business:
Production and sale of rolled aluminum products

Outline of Novelis Korea

Company name:
Novelis Korea Limited
President:
Sachin Satpute, Senior Vice President, Novelis and President, Novelis Asia
Established:
2005
Location:
Seoul, South Korea
Parent company & ownership ratio:
100% owned by Novelis
Sales:
1,753,200 million KRW (year ended December 2016)
Employees:
1,640
Business:
Production and sale of rolled aluminum products

About Kobe Steel

Kobe Steel, Ltd. is a diversified corporation with businesses in the three core areas of materials, machinery and electric power. The materials businesses include steel, welding, aluminum and copper. The machinery businesses consist of industrial machinery, construction machinery and engineering. Electric power supply is the third core business. Kobe Steel has head offices in Kobe and Tokyo, Japan. The Kobe Steel Group, consisting of Kobe Steel and its numerous subsidiaries and affiliates, has over 36,000 employees.

Novelis Korea’s Ulsan Plant

Novelis Korea’s Ulsan Plant

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