JFE Steel Corp. scrapped plans to build a blast furnace in Brazil because the strengthening real has cut the profitability of local manufacturing industries and cheap imported steel continues to flow into the country.
JFE said Aug. 12 that it made the decision after assessing the risks of the investment.
The plant was scheduled to start operating as early as in 2012.
According to the plan, JFE was to invest about 600 billion yen ($7.8 billion) in a tie-up with Vale SA, a major Brazilian iron ore mining company, and South Korea's Dongkuk Steel Mill Co., a JFE affiliate.
JFE was to take a leading role in building the blast furnace with an annual production capacity of 5 million to 6 million tons in northeastern Brazil.
JFE will now limit itself to partial investment in a separate plan, led by Vale and Dongkuk and including South Korea's POSCO, to build a blast furnace with an annual production capacity of 3 million tons.
The real has strengthened by about 10 percent against the dollar from a year ago.
Usinas Siderurgicas de Minas Gerais SA (Usiminas), an affiliate of Nippon Steel Corp., also decided last November to suspend plans to build two blast furnaces in Brazil.
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