Kobe Steel goes ahead with wire rod processing plant in Mexico

Japan’s Kobe Steel and its trading affiliate Shinsho Corp will move ahead with plans to establish a joint venture with four other companies to process steel wire rod in Mexico.

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Called Kobelco CH Wire Mexicana, S.A. de C.V. (KCHM), the facility will process wire rod into steel cold heading quality (CHQ) material for sale to automotive parts manufacturers in Mexico, Kobe and Shinsho said in a combined statement on Wednesday September 3.

With a production capacity of 40,000 tpy, the plant is expected to come into operation in the end of 2015 in the Santa Fe Industrial Park in Silao, in the central Mexican state of Guanajuato.

Total investment is expected to reach around $41 million.

The four other companies in the joint venture are Metal One Corp and Osaka Seiko in Japan, Mexico’s Grupo Simec and Chicago-based steel wire producer O&k American Corp – a division of Japan’s O&K Co.

Shinsho is anticipated to hold 40% of KCHM, followed by Metal One with 25%, Kobe, Osaka Seiko and Simec with 10% each, and O&k American with the remaining 5%.

The original Memorandum of Understanding for the project, signed early this year, comprised only Kobe, Shinsho, Osaka Seiko and USA-based Republic Steel – which is controlled by Simec.

“Mexico’s auto production of 1.5 million cars in 2009 rose to 2.93 million units in 2013, and solid growth is anticipated in the coming years,” Kobe and Shinsho said on Wednesday.

CHQ steel wire is used to make automotive fasteners and other cold-forged parts.

Demand for the product is expected to increase substantially within the next few years in Mexico as several Japanese auto parts manufacturers are setting up operations in the Latin American country, Kobe and Shinsho noted.

“By producing in an area of increasing demand, KCHM will be able to quickly supply CHQ steel wire of outstanding surface quality and contribute to expanding the business of its customers,” they added.