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Kobe Steel establishes steel processing venture in eastern China

December 12, 2007

TOKYO, December 12, 2007 - Kobe Steel, Ltd. announces that it has established a joint venture called Kobe Special Steel Wire Products (Pinghu) Co., Ltd. to process special steel wire rod in Pinghu, Zhejiang Province in China.

The joint venture will turn special steel wire rod into cold heading quality (CHQ) steel wire for use in high strength nuts and bolts, which are critical parts in automobiles. The processed wire will be supplied to Japanese automotive parts manufacturers in China. Plans call for the new company, which will start production in April 2009, to have a production capacity of 2,100 metric tons per month.

Capitalized at 1.2 billion yen, Kobe Special Steel Wire Products (Pinghu) is 50% held by Kobe Steel and 30% by trading firm Shinsho Corporation. Japanese secondary steel processors Osaka Seiko Co., Ltd. and Meihoku Kogyo Co., Ltd. each hold a 10% share. Total investments are anticipated to be about 2.6 billion yen. The joint venture, established in November 2007, will employ approximately 80 people. The chairman is Hiroyoshi Tsumura, an officer at Kobe Steel. The president is Takashi Matsunaga, deputy general manager of the Planning and Administration Department in the Iron and Steel Sector at Kobe Steel.

Automobile production in China is anticipated to increase from the 7.28 million cars made in 2006 to over 10 million cars in 2010, owing to sharply rising economic development. Japanese auto parts makers have been moving to China and boosting production in that country. Consequently, the need for local sources of special steel wire rod for auto parts has been growing rapidly. Kobe Special Steel Wire Products (Pinghu) will further strengthen Kobe Steel's supply of special steel wire rod products to meet the growing demand from Japanese automotive transplants in China.

Kobe Steel's special steel wire rod, widely used in the automotive industry, is one of the company's upper-end "Only One" Products-products in which it excels. The company is renown in the industry for the high quality of its value-added wire rod products.

To strengthen its supply of high-grade steel, Kobe Steel has been actively undertaking capital investments. Last year, the company's new No. 5 continuous caster went into operation at Kobe Works, the main production facility that produces special steel wire rod. Currently being remodeled is the No. 3 blast furnace, also at Kobe Works. As a part of its overseas strategy for China and Asia, Kobe Steel is positioning its Kobe and Kakogawa works as production bases for its special steel wire rod.

Kobe Steel is aiming to improve customer service by building a flexible, efficient supply network overseas. The company already has wire rod processing ventures in Thailand. Kobe CH Wire (Thailand) Co., Ltd. processes CHQ wire for nuts and bolts and Mahajak Kyodo Co., Ltd. processes polished bar for suspension springs and other products.

In southern China, Kobe Wire Products (Foshan) Co., Ltd. processes polished bar for suspension springs and other products and CHQ wire for nuts and bolts, while in eastern China, Jiangyin Sugita Fasten Spring Wire Co., Ltd. produces oil tempered wire for use in suspension springs. Both companies are currently in operation.

Profile of Other Equity Share Partners

Shinsho Corporation
Location:   Osaka
President:   Tsuguto Moriwaki
Founded:   November 1946
Capital   5.6 billion yen
Sales:   581.9 billion yen (nonconsolidated)
    642.1 billion yen (consolidated) (year ended March 2007)
Employees:   469

Osaka Seiko Co., Ltd.
Location:   Osaka
President:   Hitoshi Sawada
Founded:   March 1960
Capital   44 million yen
Sales:   14.6 billion yen (year ended December 2006)
Employees:   210

Meihoku Kogyo Co., Ltd.
Location:   Minokamo, Gifu
President:   Yasukazu Fukunishi
Founded:   November 1946
Capital   60 million yen
Sales:   10.1 billion yen (year ended May 2007)
Employees:   140