Japan's Nippon Steel plans to withdraw from a joint venture with Baoshan Iron & Steel, ending a decadeslong relationship.
As a result, Nippon Steel's steel production capacity in China will be reduced by 70%.
Japanese automakers, Nippon Steel's main customers, are struggling in China due to the rise of local electric vehicle makers. Nippon Steel has concluded that it would be difficult to expand its business there, and instead will concentrate its investment resources in the U.S. and India.
Baosteel-Nippon Steel Automotive Steel Sheets (BNA) was established in 2004 as a 50-50 joint venture between Nippon Steel and Baoshan Iron & Steel, or Baosteel, a member of the China Baowu Steel Group.
Nippon Steel has decided to terminate the contract when its 20-year period expires in late August, the company announced on on 23 July. The company said it plans to sell all of its BNA shares to Baosteel for 1.758 billion yuan ($241 million), subject to regulatory approval.
BNA's annual steel production capacity is 2.62Mt/yr, which accounts for about 70% of the steel production capacity of 3.6Mt that the Nippon Steel group has in China.
Following the withdrawal from the venture with Baosteel, Nippon Steel's production capacity in China will remain around 1Mt/yr, including a joint venture with Wuhan Iron & Steel, another company under China Baowu Steel Group, to manufacture tinplate used for food cans and other products.