TOKYO: Japan’s JFE Steel will start producing automotive steel sheet in Mexico as early as 2019, aiming to capitalize on the country’s status as a rising hub of the auto industry as exports to the U.S. grow.
The unit of JFE Holdings is discussing building a jointly run plant with U.S.-based steelmaker Nucor. It plans to invest about 30 billion yen ($265 million) in the factory, whose annual capacity will total roughly 400,000 tons. The two companies intend to supply mainly car doors and frame components to plants in Mexico, working close to a high-demand area to shorten delivery times.
Japanese rivals Nippon Steel & Sumitomo Metal and Kobe Steel produce automotive steel sheet in the U.S. through partnerships with Europe’s ArcelorMittal and U.S. Steel, respectively. JFE has not made the material in America since a major U.S. steelmaker it owned went bankrupt in the early 2000s. It is instead focusing on Mexico, which is gaining prominence as a supply base for its northern neighbor.
Mexico ranked seventh worldwide in automobile output in 2015 at 3.6 million vehicles, up 5.9%. With exports to the U.S. and elsewhere seen growing, some see annual production reaching some 5 million vehicles in 2020. The country boasts low labor costs, and its membership in the North American Free Trade Agreement lets it ship cars to the U.S. tariff-free. Mexico has also signed the Trans-Pacific Partnership and actively pursued free trade agreements, putting it in a good position to export to such markets as Europe and South America as well.
Automakers are accelerating Mexican expansion efforts. Nissan Motor started up a factory there in 2013, with Honda Motor and Mazda Motor following suit the next year. Toyota Motor will open a Mexican plant with an annual capacity of 200,000 vehicles in 2019. BMW and the Hyundai Motor group are also planning new facilities.
Parts and materials makers have followed the trend. Japan’s Denso will expand existing facilities in Mexico and start making transmission parts there in September. Asahi Glass brought an automotive glass factory online early this year. And in April, a joint venture between Mitsui Chemicals and South Korean petrochemical company SKC will start up a plant to produce urethane materials for seat cushions.