In light of the rapidly growing Chinese stainless steel market, Nisshin Steel, Shanghai Baoshan Group Corporation and other shareholders of Ningbo Baoxin Stainless Steel Co., Ltd. (NBSS), a China-Japan joint venture, agreed to expand the venture's production capacity to 600,000 tons per year by the end of 2005. The decision will make NBSS one of the largest makers of cold rolled stainless steel sheets in the world. The shareholders and other parties concerned held the official signing ceremony to mark their agreement today in Ningbo City.

NBSS, jointly founded in March 1996 by Chinese partners - Shanghai Baoshan and Ningbo City - contributing 66% of the capital and Japanese counterparts - Nisshin Steel, Hanwa Co., and Mitsui & Co. - contributing 34%, became operational in December 1998 as an 80,000 ton-per-year producer of cold rolled stainless steel sheets. Since the start-up, NBSS steadily increased output thanks to robust domestic demand in China and at the beginning of this year, the venture expanded its annual capacity to 160,000 tons and plans to raise the tonnage to 240,000 tons within 2003. In term of business results, NBSS has been highly successful as well. It turned profitable in 2000, wiped out all the accumulated losses in 2001 and has since been paying dividend.
In order to respond to surging demand for stainless steel in China, NBSS and the shareholders initiated serious discussions on capacity expansion, which resulted in the current project to increase the venture's output to 600,000 tons per year by the end of 2005.
The total project cost is estimated at approx. 3.8 billion yuan (approx. ¥54.5 billion) to be covered with borrowing by NBSS and shareholders' contributions. Nisshin Steel is set to invest approx. 310 million yuan (approx. ¥4.5 billion), which will increase the Company's ownership percentage to 22% from the present 20%

Taking advantage of the expansion agreement, Nisshin Steel intends to deepen its ties with Shanghai Baoshan, the major Chinese partner in the venture, so as to enhance NBSS's superiority in the highly promising Chinese market and to support NBSS in further development of stainless steel demand for broadening the management base. Moreover, Nisshin Steel will work to build NBSS not only as a purchaser of its hot rolled stainless steel coils but also as a beachhead in China and Asia within the context of its global strategy geared at promoting and boosting overseas activities.

1. Outline of the expansion

(1) Production (cold rolling) capacity to be increased: Up to 600,000 tons per year
(2) Major equipment to be newly installed: Four cold rolling mills, two annealing and pickling lines and one coil grinding line, etc.
(3) Start-up: Part of the production facilities to come on stream in April 2005
(4) Investment: approximately 3.8 bil. yuan (¥54.5 bil.)
[Cumulative total investment: approx. ¥106 bil.]
(5) Nisshin's contribution: approx. 310 mil. yuan (¥4.5 bil.) [Cumulative total contribution: approx. ¥9.1 bil.]
(6) Site extension: 417,000 m2 for the current project (enlarging the overall premises to 732,000 m2)
(7) Employees: Approx. 1,000 after the expansion (Approx. 490 at present)

[Supplemental information]

(1) Company name: Ningbo Baoxin Stainless Steel Co., Ltd.
(2) Founded: March 1996
(3) Location: Xiapu town, Beilun District, Ningbo
(4) Current paid-in capital: 1.56 bil. yuan (¥22.6 bil.)
(5) Current shareholding:
Chinese partners: 66% (54% held by Shanghai Baoshan Group
and 12% by Ningbo City)
Japanese partners: 34% (20% held by Nisshin Steel, 7%
by Hanwa & Co., and 7% by Mitsui & Co.)
(6) General Manager: Liu An
(7) Income before tax: 140 mil. yuan (¥2 bil.) in 2002