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News Release

JFE Steel Corporation

JFE Steel to Acquire 24% Stake in Pancheng Yihong Pipe in China

TOKYO — JFE Steel Corporation announced today that it has agreed with Pancheng Yihong Pipe Co. (PYP), a Sichuan, China-based processor of high-quality seamless pipes for oilfields, to acquire a 24% stake in the company by purchasing newly issued shares.

PYP is a joint venture originally owned 60% by PanGang Group Chengdu Steel & Vanadium Co., Ltd. (CSST) and 40% by Marubeni-Itochu Steel Inc. As a result of JFE Steel’s capital investment, these ratios will change to 51% for CSST and 25% for Marubeni-Itochu Steel. JFE Steel’s 24% share will turn the company into a JFE Steel affiliate under equity-method accounting.

PYP threads and then sells seamless pipes for oil country tubular goods (OCTG) produced by CSST. In partnership with JFE Steel, PYP aims to expand into Chinamarket for high-grade oil country tubular goods (OCTG) that offer superior quality to high temperature and high pressure. Under the new agreement, PYP will be licensed JFEBEAR technology from JFE Steel for all sizes of OCTG with premium thread connections, which are expected to grow in demand.
Under an ongoing expansion plan that began in 2007, PYP plans to raise its annual capacity of OCTG from 230,000 tons at present to 330,000 tons eventually.

In addition to JFEBEAR, PYP has been licensed FOX technology for medium-diameter pipe from JFE Steel. Both technologies are used in severe conditions of deeper oil and gas wells. These connections are used especially in wells over 3,000 meters deep and in wells with corrosive conditions by carbon dioxide or hydrogen sulfide.

While supporting PYP’s sales of premium-thread OCTG through technology licensing, JFE Steel will reinforce its package supply capability with JFE Steel’s 13% Chrome OCTG.

About Pancheng Yihong Pipe Co.

Location: Chengdu, Sichuan Province, China
Chairman: Cheng Haitao
New ownership (planned): PanGang Group Chengdu Steel & Vanadium Co., Ltd.: about 51%
Marubeni-Itochu Steel Inc.: about 25%
JFE Steel Corporation: about 24%
Founded: 2005
Employees: About 500
Main products: Oil country tubular goods (OCTG)
Main facilities: 3 threading lines
Production: 180,000 tons in FY 2009 (200,000 tons in FY 2008)
Sales: 250 million yuan (3.5 billion yen) in FY 2009

[PYP factory in Chengdu]

Photo (PYP factory in Chengdu) Photo (PYP factory in Chengdu)

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