April 4, 2018 / 6:51 AM / in 8 months

Kobe Steel to invest $471 million to raise automotive steel output

FILE PHOTO: The logo of Kobe Steel (Kobelco) is seen at the company headquarters in Kobe, western Japan October 24, 2017. REUTERS/Thomas White/File Photo

TOKYO (Reuters) - Kobe Steel Ltd., Japan’s third-biggest steelmaker, said on Wednesday it will invest 50 billion yen ($471 million) in domestic facilities to increase output of high-tensile steel to meet a growing need for lighter materials from automakers.

It is the company’s first major capital investment since it admitted to supplying products with falsified specifications to about 500 customers last year, throwing global supply chains into turmoil.

Kobe Steel said it will build a new production line at Kakogawa Works in western Japan to raise its annual production capacity of automotive steel sheet by 240,000 tonnes.

The new facility, which combines a continuous annealing line where metal is heated and cooled to make it stronger but less brittle, with hot-dipped galvanizing and other equipment, is expected to begin operations in February 2021.

The move comes as automakers are using lighter yet stronger materials to meet stricter regulations on fuel efficiency and collision safety.

Kobe Steel also said it will spin off its planned 1,300-megawatt (MW) power generation project in Kobe in western Japan into a new company on May 1.

“The spinoff is to make it easier for the new project to raise funds through project financing,” a Kobe Steel spokesman said.

Kobe Steel plans to build two 650-MW coal-fired power units in its old steelworks in Kobe, and aims to have the units operational in 2022 and 2023.

Japan’s industry ministry separately issued a statement virtually approving Kobe Steel’s coal power station project following an environmental assessment.

Reporting by Yuka Obayashi; Editing by Kenneth Maxwell and Manolo Serapio Jr.

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