Arcelor, Nippon Steel to Double U.S. Output

Arcelor Mittal and Nippon Steel have agreed to boost automotive sheet capacity at their
equally-owned joint venture in the U.S., the Nikkei business daily reported on Monday.

L.N. Mittal and Akio Mimura, the heads of the world's No. 1 and No. 2 steelmakers, also agreed to expand their alliance in areas other than their U.S. venture at a meeting in New Delhi on Sunday, the paper said.

The two companies are seen doubling the capacity at the 500,000 tons-a-year Indiana plant at an estimated cost of 30 billion yen ($254 million) to meet strong demand from Japanese automakers such as Toyota Motorand Honda Motor, it said.

Nippon Steel spokesman Hiroshi Nakashima said no decision had been made. "We have been saying that we would need more capacity in the United States to catch up with strong demand there, but the size of the investment and other details had not been decided," he said.

The paper quoted Chairman L.N. Mittal as saying Arcelor Mittal had no plans to launch any bids in Japan. "Nippon Steel and Mittal's ties are solid and strong, and excel in any other M&A deals," the paper quoted Mittal as saying.

The paper also said Arcelor Mittal and Nippon Steel would consider tie-ups in areas other than the United States and Europe. In Europe, Nippon Steel has supplied car steel sheet to Japanese automakers there through Arcelor.

Speculation of further realignments in the global steel sector since the birth of Arcelor Mittal last year has boosted shares in Nippon Steel and the world's major steel makers.

Nippon Steel stock has gained 26% this year.

Nippon Steel, the biggest beneficiary of strong worldwide sales of Japanese cars, earlier this month raised its full-year forecast for the third time in six months on booming demand from carmakers and said it would post a record profit for a third straight year.

The Japanese company has been strengthening capital and business ties with its allies including South Korea's POSCO , helping it increase shipment volumes through mutual supplies of steel slabs as well as raise defenses against unsolicited takeover bids.