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Kobelco Cranes to form manufacturing venture in China

First Japanese crawler crane maker to produce locally

September 16, 2010

TOKYO (September 16, 2010) - Kobelco Cranes Co., Ltd., a wholly owned subsidiary of Kobe Steel, Ltd., plans to manufacture crawler cranes in China.

Kobelco will form a joint venture with Chinese partner Sichuan Chengdu Chenggong Construction Machinery Co., Ltd. (or CG) in October. The joint venture, to be called Chengdu Kobelco Cranes Co., Ltd., will make and sell the cranes. A total of 2 billion yen will be invested in the new plant and production is to start in August 2012. By 2015, Kobelco aims to produce 80 crawler cranes a year to meet around 7% of the total demand in China.

Crawler crane production in China will enable Kobelco to strengthen its involvement in the world's largest market for this variety of construction machinery. The Chinese market comprises 700 units of the world's total demand of 2,500 crawler cranes.

The Kobe Steel Group will become the world's first construction equipment maker to manufacture both hydraulic excavators and crawler cranes in China and India. The Group intends to supply machines for use in construction, civil engineering and new energy investments, further expanding its business.

Kobelco Cranes has a 50% share of the Japanese market for crawler cranes, its main product. In the world, Kobelco estimates that it has a 17% market share. Kobelco's plant in China will be its second overseas manufacturing location after India. The China plant will be the first facility of a Japanese manufacturer to make crawler cranes.

CG has been a partner with Kobelco Construction Machinery Co., Ltd. for many years and has a deep understanding of Kobelco's manufacturing methods. To make a full-scale entry in China, where Chinese construction equipment makers are rising, Kobelco Cranes came to the conclusion that teaming up with CG was essential to keep investment costs down and to quickly enter the market.

Kobelco's new plant will be located in the Chengdu Economic & Technological Zone in Chengdu, Sichuan Province. The plant will be adjacent to CG's new plant to which it will move in 2011. Kobelco Construction Machinery's joint venture, Chengdu Kobelco Construction Machinery Co., Ltd. (or CKCM), is also located next door. By situating Kobelco Cranes' new plant near CG and CKCM, Kobelco will be able to share distribution and information, which will improve the efficiency of group management.

The world market for crawler cranes temporarily dropped following the financial crisis in autumn 2008, but has begun to pick up again. The Chinese market is currently supported by strong demand from sharply rising infrastructure investments. Demand is steadily growing, and over the medium- to long-term future, it is expected to continue expanding. Development of the western region is underway, especially in the inland. region of Sichuan Province. Kobelco is targeting its 250-ton class crawler cranes, in which it excels, for this market.

The Kobe Steel Group launched in April the Medium- to Long-Term Business Vision, KOBELCO VISION "G," under which it would actively develop its overseas business. Overseas sales, which comprised 33% of total sales in fiscal 2009, are projected to increase to about 50%, boosting overall sales and profits. An important initiative is to establish a presence in large markets, especially China and India.

Ever since the Kobe Steel Group's crane business began in 1953 (when it was a division of Kobe Steel), production has been centered in Japan, focusing on quality and technology. To quickly grow in the global market, Kobelco plans to start manufacturing in India followed by China, overcoming foreign exchange risks and tariff barriers.

Profile of Chengdu Kobelco Cranes

Name : Chengdu Kobelco Cranes Co., Ltd.
Head office : Chengdu Economic & Technological Zone, Chengdu, Sichuan Province, China
Capital : 2 billion yen
Equity : Kobelco Cranes 51%, Sichuan Chengdu Chenggong 49%
Business : Production, sales and servicing of construction machinery
Sales : 10 billion yen (in 2015)
Directors : Seven (including four from Kobelco Cranes)
Employees : 300 (in 2015)

Details of the Plant

Land area : 133,000 sq m
Facility area : 6,900 sq m
Scope of production : Assembly manufacturing, painting and shipment
Start of operations : August 2012

Profile of Equity Partner

Name : Sichuan Chengdu Chenggong Construction Machinery Co., Ltd.
Head office : Chengdu Economic & Technological Zone, Chengdu, Sichuan Province, China
Established : October 30, 2001
Capital : 140 million yuan
Sales : 2.4 billion yuan (in 2009)
Business : Production and sales of construction machinery (mainly wheel loaders)
President : Yang Jian Chuan
Employees : About 3,000
Signing ceremony with Chinese partner Sichuan Chengdu Construction Machinery
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