Nippon Steel, Marubeni-Itochu Join Safal Steel

Nippon Steel and Marubeni-Itochu Steel announced on Friday they agreed with African flat rolled steel processor, Safal group for equity participation into Safal Steel in South Africa, which is part of Safal group and constructs new plant. Nippon Steel and Marubeni-Itochu acquire 7% voting right each in Safal Steel for each around 300 million yen. Nippon Steel provides half of required hot rolled steel for the new plant. Through the first investment in steel company in Africa, Nippon Steel and Marubeni-Itochu try to secure stable sales route in South Africa when steel demand grows rapidly in the country and neighboring countries toward World Cup in 2010.

Safal Steel constructs new plant in Cato Ridge near Durban for US$ 109.4 million. The firm launches new plant with annual 300,000 tonnes of pickling line, 150,000 tonnes of cold rolling mill, 150,000 tonnes of hot dip galvanizing line and 100,000 tonnes of color line in July 2009.

Nippon Steel and Marubeni-Itochu talked on the matter since October after Safal group requested the capital participation and flat steel supply. Nippon Steel decided to supply 50% of hot rolled flat steel requirement by Safal Steel, which will produce annual 150,000 tonnes of coated and colored products. Nippon Steel and Marubeni-Itochu are allocated the new share of Safal Steel by around December 15. Safal group controls 86% of Safal Steel after the capital increase to 120 million rand.

Mauritius based Safal group has coated steel processing and construction materials fabricating operations from East to South of Africa. Nippon Steel has business relationship for more than 40 years with the group and already provides 100,000 tonnes of hot rolled flat steel annually.

South African raw steel output was 9 million tonnes out of 18 million tonnes in Africa. South African sheet steel demand is 3.6 million tonnes compared with 6.7 million tonnes in total Africa. The steel demand grows at annual 20% for years in South Africa when the country develops infrastructure for World Cup.