• JFE Steel Corporation
• Mitsui & Co., Ltd.
• Erdos Japan Co., Ltd.

TOKYO — JFE Steel Corporation (President: Hajime Bada), Mitsui & Co., Ltd. (“Mitsui“; President: Shoei Utsuda) and Erdos Electric Power & Metallurgical Co., Ltd. (“Erdos“; President: Linxiang Wang) have reached agreement to expand the silico-manganese plant operated by the three companies as a joint venture at Inner Mongolia EJM Manganese Alloys Co., Ltd. (“Erdos EJM“). After receiving the necessary licenses and permits from the Chinese authorities, the partners plan to increase the company's capitalization from 15 million US dollars to approximately 30 million US dollars by the end of the year.

Expansion will entail construction of a second plant (No. 2 plant) that will be of the same capacity as the No. 1 plant that came online in July 2006 (25,500 kVA x 2 units; 75,000 tons/year); commercial production is expected to commence at the end of 2008. When the No. 2 plant comes online, Erdos EJM will have a total silico-manganese production capacity of 150,000 tons/year, making it the largest producer in China and one of the largest producers anywhere in the world.

The JFE Steel group purchases approximately 90,000 tons of silico-manganese a year, employing it as a manganese additive and de-oxidant in steelmaking. The vast majority is imported from Erdos EJM. However, the rapid growth of the Chinese steel industry in recent years has resulted in a sharp increase in demand for silico-manganese in the domestic Chinese market, making it more challenging to secure stable supplies of the material. The addition of the No. 2 plant will give the JFE Steel group a more stable silico-manganese sourcing system.

Mitsui supplies manganese ferroalloy, primarily to Japanese firms. Its investment in the construction of the No. 2 plant at Erdos EJM will strengthen its framework for a stable supply of silico-manganese to the JFE Steel group and other customers.

Erdos, working under the Chinese central government's policy to develop the western regions of the country, is implementing a ferroalloy production project using thermoelectric power generated with the abundant coal resources in the city of Erdos, Inner Mongolia Autonomous Region. The addition of the Erdos EJM No. 2 plant alongside the No. 1 plant and the ferrosilicon and silicon carbide plants will further expand the company's ferroalloy production system.

Profile of Joint Venture

Company name:	Inner Mongolia Erdos EJM Manganese Alloys Co., Ltd.
Address:	Qi Panjing, Erdos City, Inner Mongolia Autonomous Region, People's Republic of China
Capital:	15 million US dollars (to be increased to 30 million US dollars)
Shareholders:	Erdos	51.0%
	JFE Steel	24.5%
	Mitsui	24.5%
Product lines:	Silico-manganese
Production capacity:	No.1 plant	75,000 tons/year (25,500 kVA x 2 units) Production began in July 2006
	No.2 plant	75,000 tons/year (25,500 kVA x 2 units) To be commissioned at the end of 2008
Major markets:	Japan, China, etc.

Profile of Erdos Electric Power & Metallurgy Co., Ltd.

Established in 2003 as a wholly-owned subsidiary of Erdos Cashmere Group Co., Ltd. In accordance with the Chinese central government's policy to promote development in the western region, the company has been producing ferroalloys using thermoelectric power generated with rich coal resources in Erdos City.

Erdos Cashmere Group Co. is an integrated processing company that began in 1969 spinning cashmere and continues to be one of the world's largest processors of cashmere products. Headquartered in Erdos City, Inner Mongolia, the group includes 72 subsidiaries and affiliates; flagship Erdos Cashmere Products Co., Ltd. is listed on the Shanghai Stock Exchange.

Location of Inner Mongolia Erdos EJM Manganese Alloys Co.