Kobe Steel in Talks to Construct $200 Million Plant in U.S.

Kobe Steel Ltd. (5406), Japan’s fourth- largest steelmaker, said it’s in talks with Cliffs Natural Resources Inc. (CLF) to build a $200 million plant in the U.S.

The factory, to be located either in Michigan or elsewhere in the U.S., is under consideration and details haven’t been decided, Hiroyuki Hashimoto, a spokesman for the Kobe, Japan- based company said today in a telephone interview.

Kobe Steel is seeking to expand the use of its ITmk3 technology for a plant to produce iron nuggets from low-grade iron ore, as rising raw materials costs squeeze steelmakers’ margins. Iron nuggets provide feedstock for electric arc furnaces that usually use scrap steel.

The plan was reported earlier today by the Nikkei newspaper. Kobe Steel and Cliffs Natural Resources will seek to open a low-cost mill in Michigan in 2014, the report said without saying where it obtained the information. Michigan is one of the locations being considered, Hashimoto said.

Cliff’s, North America’s largest ion-ore producer, is based in Cleveland.

It typically costs about $200 million to build a nugget plant with capacity of 500,000 tons a year, Hashimoto said.

To contact the editor responsible for this story: Andrew Hobbs in Sydney at ahobbs4@bloomberg.net.