A joint venture between Guangzhou Iron & Steel Enterprises Holdings Ltd and Japan's JFE Steel Corp was launched yesterday to better satisfy China's increasing demand for high-quality sheet steel.

Located in the Guangzhou Nansha Economic and Technological Development Zone, the new Guangzhou JFE Steel Sheet Company Ltd will manufacture hot-dip galvanized sheet steel starting in early 2006.

Total investment for the project is US$1 billion and the investment for the initial phase is US$200 million.

JFE, a top supplier of high-value-added steel in Japan, is investing 51 per cent of the capital input, with the remaining 49 per cent coming from Guangzhou Iron & Steel Enterprises Holdings Ltd, China's leading supplier of iron and steel.

JFE Steel Corp is capable of an annual iron and steel production output of 27 million tons.

The joint venture aims to yield 400,000 tons of hot-dip galvanized sheet steel annually, which will be used primarily in the automobile industry, with some portions of production going to the electric appliance industry and construction applications.

The enterprise will consider diversifying its products to include cold rolling steel products later.

"The project will help satisfy the rapidly intensifying domestic market demand and the enterprise will at the same time benefit handsomely from the promising boom," said Yuan Jinxi, chairman of Guangzhou Iron & Steel Enterprises Holdings Ltd.

The mayor of Guangzhou, Zhang Guangning, expects the new company will help lower the production costs of the city's automobile industry and trigger the development of related industries in the Nansha zone.

Few iron and steel enterprises, if any, are able to produce hot-dip galvanized sheet steel in China.

Domestic automobile makers and household appliance suppliers have to rely very heavily on imports, primarily from Japan and South Korea.

While primarily meeting the domestic demand, the joint venture also targets other markets, particularly in Southeast Asia.

Domestic market demand for hot-dip galvanized sheet steel has been rapidly intensifying in the past few years in tandem with mushrooming auto and household appliance projects across the nation.

Official sources say China is expected to turn out 6.10 million automobiles in 2005.

And in Guangzhou alone, Japan's Honda, Nissan and Isuzu have all set up automobile joint ventures, while Toyota will soon set up a joint venture manufacturing Camry sedans in the economic zone.

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