JFE Holdings Inc, Japan's second-largest steelmaker, has entered into a strategic tie-up with JSW Steel Ltd, for automobile steel production as vehicle demand increases in the world's second-fastest growing major economy.
The companies will seek to gain production capabilities in India to supply high-end products to automakers in the country.
JFE and JSW will also collaborate on a planned factory in West Bengal, JSW vice-chairman and managing director Sajjan Jindal said at a joint press conference in Mumbai today. The companies will consider buying stakes in each other later.
Hajime Bada, chief executive of JFE Steel Corporation - the steel arm of JFE Holdings - said the companies hope to sell steel to foreign automakers, such as Toyota, Honda and Suzuki, which are expanding sales in India.
JFE Steel and JSW Steel will also consider mutual shareholdings and cooperation in other business areas such as steel for products other than automobiles, raw materials procurement and quality control, the Japanese company said.
India's second-largest steelmaker by capacity, JFE said it would also provide JSW Steel with technologies to manufacture high-grade steel sheets, including galvanised sheets.
At the press conference, executives of both the companies provided only sketchy details of the strategic tie-up, saying they are still working on the details. "It's part of the discussions that the two companies will have mutual shareholdings. But how much stake and by when, are part of the talks between the companies," said Jindal, vice chairman of JSW Steel, adding that the tie-up will focus on the Indian market.