TOKYO: Nippon Steel will dissolve its joint venture with China’s Baoshan Iron & Steel , slashing the Japanese company’s steel production capacity in China by 70%, the Nikkei business daily reported on Tuesday.

The company has decided to shift its attention to expansion in the United States and India, as its key customers, Japanese automakers, are facing tough competition with Chinese electric vehicle makers, the report said.

Nippon Steel has been looking to end cooperation with Baoshan, a subsidiary of state-owned China Baowu Steel Group, the world’s largest steelmaker, for about two years, Nikkei said. Their 20-year agreement was set to expire this summer and will not be extended, it added.

Baoshan will buy Nippon Steel’s share in the joint venture, with the deal estimated to cost several hundred million dollars, Nikkei said, without providing the exact figure.

After ending the JV, Nippon Steel will still have production capacity of around 1 million metric tonnes per year in China due to its joint business with Wuhan Iron and Steel, another unit of China Baowu Steel Group, Nikkei said.

Nippon Steel and Baoshan did not immediately respond to Reuters’ requests for comment.

The decision was not linked to Nippon Steel’s bid for U.S. Steel, which has led to some U.S. scrutiny over the Japanese company’s assets in China, the Nikkei report said.

Nippon Steel said last week it had hired former U.S. Secretary of State Mike Pompeo to help with its effort to acquire U.S. Steel. Pompeo is visiting Japan this week, according to local media reports.

Reuters