Novelis announces strategic joint venture partnership with Kobe Steel

SPOKANE (Scrap Monster): Novelis Inc., the global leader in aluminum rolled products and the world's largest recycler of aluminum has announced a strategic joint venture deal with the Japanese Kobe Steel, aimed at optimizing production at the Ulsan, South Korea facility. The deal was signed between Novelis Korea Limited, a wholly owned subsidiary of Novelis Inc., and Kobe Steel, Ltd. The joint venture deal named Ulsan Aluminum, Ltd. is expected to close in September this year, subject to customary closing conditions.

As part of the deal, Novelis will sell 50% of its ownership interest in Ulsan facility for a sum of $315 million. Further to the deal, both the companies will jointly own and operate the facility. Both companies will be equally responsible for ensuring metal supply and building commercial relationships. The JV will result in better utilization of the Ulsan rolling facility by Novelis. Also, the cold-rolled aluminum produced by the facility will feed two Kobe steel locations in Japan and China. The plant will be optimized to produce approximately 300,000 tons of steel per year, the JV noted. Located in the industrial hub of Korea, Ulsan rolling facility currently employs around 600 people.

According to sources, the joint venture deal with Novelis is in line with Kobe Steel’s growth strategy. The JV is the result of Kobe’s need to ensure stable supply to its Chinese and Japanese operations and Novelis’ determination to better utilize its South Korean rolling assets. Incidentally, the market for can stock, one of Ulsan’s core product, is anticipated to witness significant growth. The JV will make better utilization of aluminum panels used largely by automotive industry. The efforts to produce light weight vehicles in order to meet environmental regulations may boost the demand for aluminum panel material.

Novelis had recently carried out major expansion works at the Ulsan and Yeongju plants in 2013. As part of the two-year expansion plan which started in 2011, the company had made combined investments of approximately $400 million in these facilities. The expansion in Ulsan facility included addition of hot finishing mill, pusher furnace and annealing furnaces. The Ulsan rolling capacity would continue to focus on automotive and specialty sheet in order to meet the increasing demand for lightweight rolled aluminum products across Asia, Novelis press release noted. Further, the cash proceeds from the transaction will help the company to reduce its net debt and enhance its strategic flexibility, it added. According to Steve Fisher, President and Chief Executive Officer of Novelis, the joint venture leverages the company’s experience with other successful joint ventures to better serve its customers.

Novelis, a subsidiary of India-based Hindalco Industries Ltd., operates in 10 countries and has approximately 12,000 employees. The company is a major supplier of premium aluminum sheet and foil products to transportation, packaging, construction, industrial and consumer electronics markets throughout North America, Europe, Asia and South America.

Kobe Steel is a diversified corporation with businesses in the three core areas of materials, machinery and electric power. The Kobe Steel Group, consisting of Kobe Steel and its numerous subsidiaries and affiliates, has more than 36,000 employees.