Tokyo-based Kobe Steel Ltd. is part of a consortium of companies studying plans to build a joint-venture steel processing operation in Mexico. Under consideration is a new manufacturer to process steel wire rod into cold-heading quality (CHQ) steel, to supply automakers and their suppliers.

Joining Kobe Steel in the discussion are its affiliated trading company Shinsho Corporation; Metal One Corporation, a steel trading company co-owned by Mitsubishi Corporation and Sojitz Corporation; Osaka Seiko Ltd., a Japanese producer of steel wire for cold heading and cold forging processes; and Republic Engineered Steel, an integrated producer of hot- and cold-rolled steel long products that is a subsidiary of Mexican steelmaker Grupo Simec.

CHQ products are rolled and formed by force through dies, in high volumes, to impart defined shapes and high strength, maintaining the mechanical qualities of the steel. They are used in high volume to produce fasteners, in this case automotive quality fasteners.

The justification for the proposed venture is the rising level of automotive manufacturing in Mexico, which totaled 2.93 million units in 2013 (almost doubling in volume since 2009), with more growth anticipated in the years ahead. Most of the existing suppliers of CHQ in the region are steelmakers exporting from the U.S. and Japan.

Also, Japanese auto parts manufacturers are establishing new operations in Mexico. This trend is driving increasing demand for CHQ steel wire in the region, for automotive fasteners and other cold-forged parts.

Kobe Steel has numerous manufacturing subsidiaries around the world — including companies that process CHQ products in Thailand and China. In North America, Kobe Steel holds a 20% interest in in Grand Blanc Processing LLC in Holly, Mich., which makes CHQ wire. However, the proposed joint venture would be Kobe Steel’s first holding in Mexico.

The cost and terms of the development are not known, but Kobe Steel indicated the five companies have a memorandum of understanding to consider the joint-venture’s production equipment, location, number of employees, and timing for the establishment, among other issues.

Although a Kobe Steel representative reiterated that the project remains “in the mulling stage,” the company's statement indicated the prospective venture would start operations in mid-2015.