Nippon Steel and several Japanese partners have formed a joint venture to build a steel plant in the central Mexican state of Guanajuato to supply the automotive industry, the Nikkei business daily reported Tuesday.

The $39.6 million plant is expected to begin production in mid-2013 in the city of Silao and employ about 200 people.

The plant will have the capacity to produce some 24,000 tons of steel parts annually.

"Nippon Steel, Sumitomo Pipe & Tube, Sumitomo Corporation, and Metal One have long discussed entry into the Mexican market with a view to capturing demand for automotive steel pipes/tubes in this country," Nippon Steel said in a statement.

The plant will supply the growing automotive industry in Mexico, where Japanese automakers, such as Nissan Motor Co. and Honda Motor Co., have made large investments in recent years and ramped up production.

"The joint-venture company is scheduled to begin production in June 2013 and will supply products to Japanese, North American and European automakers and auto parts manufacturers in Mexico," Nippon Steel said.

The plant will supply parts to General Motors, which has a plant in Silao, Ford Motor Co. and Germany's Volkswagen.

"Approximately 2.6 million four-wheeled automobiles were produced in Mexico in 2011. Automobile production in Mexico is expected to increase substantially in the future as a result of new entry into the Mexican market and the increase in production capacity of Japanese automakers. This increase in automobile production is expected to lead to a rapid expansion of demand for middle- to high-grade steel pipes/tubes in which Nippon Steel and Sumitomo Pipe & Tube have competitive strength," Nippon Steel said.

Nippon Steel will have a 55 percent stake in the joint venture, while its partners will control the remainder of the stock.

Metal One, a unit of the Mitsubishi Group, announced plans last month to build a sheet-steel plant in Atitalaquia, a city in the central Mexican state of Hidalgo.

The steel plant in Guanajuato will manufacture pipes to be used mainly in automobile exhaust, fuel and steering systems, as well as some parts for motorcycles.

Nippon Steel, the world's fourth-largest steelmaker by volume, plans to import raw materials from Japan and the United States for the plant.

The Japanese steelmaker operates similar plants in China, Thailand, India and Indonesia, and it has the capacity to produce about 180,000 tons of these types of pipes for the automotive industry annually in Asia alone. EFE