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Kobe Steel and ALCHA to end letter of intent for aluminum joint venture in China

December 25, 2012

TOKYO, December 25, 2012 - Kobe Steel, Ltd. and Jiangsu ALCHA Aluminium Co., Ltd. have decided to terminate their letter of intent to form a joint venture to produce aluminum coil and sheet.

In December 2011, Kobe Steel and China's ALCHA, a major producer of aluminum rolled products, announced that they had signed a letter of intent to conduct a detailed feasibility study for the establishment of a joint venture in Baotou, Inner Mongolia to produce and sell aluminum coil and sheet. The joint venture was envisaged to be 80 percent owned by Kobe Steel and 20 percent by ALCHA. Capital investment was estimated at about 40 billion yen. The production capacity was to be about 200,000 metric tons per year.

While conducting the feasibility study, the two companies had differences and were unable to reach agreement. As a result, Kobe Steel and ALCA decided to allow the letter of intent to expire on December 30, 2012.

China's demand for aluminum sheet for automobiles and beverage cans, major applications for Kobe Steel, is anticipated to grow sharply in the coming years. Kobe Steel will continue to study the possibility of establishing a production base for aluminum sheet in China.

The ending of the letter of intent will not affect Kobe Steel's consolidated and nonconsolidated earnings results.

Background Information

Envisaged Joint Venture in Letter of Intent (December 2011)

Planned for January 2013
Business activities:
Production and sale of aluminum sheet
Baotou, Inner Mongolia
2 billion RMB (about 24 billion yen)
Equity share:
Kobe Steel 80%, ALCHA 20%
Capital investment:
About 40 billion yen
Annual capacity:
200,000 metric tons
Planned for 2015

Profile of ALCHA

Jiangsu ALCHA Aluminium Co., Ltd
December 2002
Changshu, Jiangsu Province
Zhang Ping
340 million RMB
Major shareholder:
Changshu Aluminium Foil Factory 39%
Production and sale of aluminum foil, sheet, coil and strip
2,054 million RMB (in 2011)
643 (at the end of June 2012)

Overseas Development of Kobe Steel's Aluminum Business

  • In September 2010, Kobe Steel established Kobe Aluminum Automotive Products (China) Co., Ltd., to make aluminum forgings for automotive suspensions in China. Production began in August 2012.
  • May 2003 saw the formation of Kobe Aluminum Automotive Products, LLC in Kentucky, USA to produce aluminum forgings for automotive suspensions. The company has also decided to produce cast aluminum bars for use in car air conditioning compressor parts. Start-up is scheduled for August 2013.
  • In February 1992, Kobe Steel established Kobe Precision Technology Sdn. Bhd. in Malaysia to make aluminum substrates for hard disk drives.

Kobe Steel aims to further increase the presence of its aluminum business around the world including China, Asia and the United States.