Sumitomo to Bail out of US Joint Venture

Following the collapse of LTV Steel, Sumitomo Metals will be pulling out of L-S Electro-Galvanizing (LSE), the joint venture it established with LTV in 1985. Sumitomo intends to sell its 40% share in LSE to AK Steel Corp, and could complete the deal as early as this month.

LSE was set up to manufacture electroplated steel sheet for automotive applications and has a capacity of approximately 450,000 tons per year. Sumitomo contributed technical expertise to the joint venture and also took a 5% share in LTV.

While several joint ventures exist with Japanese and US partners, the Japanese are understood to be hesitant about investing more money in them due to the fragile state of the US steel market. However, they are looking to increase production from their US operations. Increased government protection of local industry to stem the tide of imports, has also helped to decrease the competitiveness of the local steel industry.

This situations could see Japanese auto makers source steel locally from US manufacturers, unless the joint ventures are able to increase production capacities.

For more information on automotive steel click here.

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