European steelmaker Arcelor SA said Tuesday it has signed an $800 million agreement with Japan's Nippon Steel and China's Bao Steel to build a new steel plant in Shanghai that will produce 1.7 million metric tons a year.

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In a statement, Arcelor said the facility will produce flat carbon steel for China's booming automobile industry and will include cold rolling and galvanizing operations.

Arcelor said the joint-venture comes within the scope of Arcelor's global strategic alliance with Nippon Steel.

Arcelor will have a 12% equity stake in the company being set up to run the steel mill. Nippon Steel will have a 38% stake, while Bao Steel will control 50% .

Start-up is scheduled for the second quarter of 2005.

Arcelor claims to be the world's largest steel producer. It produce 44 million tons of steel in 2002 and reported revenue of EUR26.6 billion.

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