Novelis Inc. has entered into a joint venture agreement with Kobe Steel, Ltd., a producer of aluminum rolled products in Japan. The joint venture, to be named Ulsan Aluminum, Ltd., will be formed by Novelis selling Kobe Steel 50% of its ownership interest in its aluminum rolling facility in Ulsan, South Korea, for US $315 million. Through the venture, Novelis and Kobe Steel will jointly own and operate the Ulsan facility, with each company remaining responsible for its metal supply and commercial relationships. The transaction is expected to close in September 2017, subject to customary closing conditions.
Kobe Steel’s need to secure stable supply capacity in Asia complemented Novelis’ aim to better utilize its rolling assets, leading to the definitive agreement to turn the Ulsan Plant into a joint venture.
“In Japan, demand for can stock, one of Kobe Steel’s core products, is expected to remain firm. Demand for aluminum panel material is also anticipated to expand. To meet growing demand in Japan and China for these aluminum products, Kobe Steel had been considering how to secure stable supply capacity, an important issue,” noted Kobe Steel. The joint venture will provide cold-rolled aluminum as a semi-finished product to Kobe Steel for use at two of its locations: the Moka Plant in Tochigi Prefecture, Japan and subsidiary Kobelco Automotive Aluminum Rolled Products (China) Co., Ltd. in Tianjin, China. Kobe Steel will be able to receive up to half of the Ulsan Plant’s production capacity of approximately 300,000 tons per year.
By entering into this joint venture, Novelis expects utilize its rolling capacity at Ulsan, which will continue to focus on automotive and specialty sheet in order to meet the increasing demand for lightweight rolled aluminum products across Asia. The company said this will allow it to drive operational efficiencies and process enhancements. As a result, Novelis’ Ulsan facility, along with its Yeongju facility in South Korea and its Changzhou facility in China, will be better positioned to deliver innovative, value-added products and services to customers.
Steve Fisher, president and chief executive officer of Novelis, said, “As a company, we constantly identify business opportunities that allow us to deliver maximum value across our global operations and we continue to see Asia as a strategic market. By entering into this joint venture, we are able to leverage our deep experience with other successful joint ventures to more efficiently serve our customers and increase our strategic flexibility in order to capitalize on potential future market opportunities.”
Located in the industrial hub of Korea, Novelis’ Ulsan facility employs approximately 600 people and currently focuses on the production of rolled aluminum sheet for a variety of markets in Asia. The plant completed a major expansion at the site in 2013, adding a new three-stand hot finishing mill as well as a pusher furnace and annealing furnaces.