"We are considering various options," Akio Mimura, president of the Tokyo-based company said yesterday after the Nikkei English News reported it may double production.

Related readings:  Profit of steel industry hits historical high  China slows down investment in steel industry  Baosteel sets sights on overseas listing by 2010  Nippon Steel, Baosteel mull tie-up

" I haven't heard of any plans to double the output," said Chen Ying, chief financial officer of Baoshan Iron & Steel Co, Baosteel's listed unit.

China's economy has grown by an average nine percent a year in the past decade, making car ownership affordable for more people, Bloomberg News reported.

Auto makers, including General Motors Corp and Volkswagen AG, sold 25 percent more vehicles in China last year, as sales surpassed those in Japan for the first time.

Shares of Nippon Steel rose 32 yen, or 3.9 percent, to close at 849 yen (US$7.25) on the Tokyo Stock Exchange yesterday. Baoshan Steel shares gained 0.6 percent to 9.38 yuan (US$1.20) in Shanghai yesterday.

Doubling output at the Baosteel-NSC/Arcelor Automotive Steel Sheet Co's plant in Shanghai to 1.6 million tons will cost as much as US$425 million, Nikkei reported without citing anyone. The three companies are expected to meet at the end of March, the paper said.

"A production capacity increase is one option," Mimura said. "The expansion in China's auto market is beyond expectation. But we have not decided anything."

The joint venture, which began in 2005, initially produced about 800,000 tons a year of galvanized steel sheets mostly for automobiles, according to Nippon Steel. The plant has capacity to produce one million tons of galvanized steel, according to Baosteel.

Baosteel, China's largest steel maker, has a 50 percent stake in the venture, with Nippon Steel holding 38 percent. Arcelor Mittal, the world's top steel producer, holds 12 percent.

China's vehicle sales will likely rise 18 percent this year as economic growth boosts demand, the China Association of Automobile Manufacturers said on January 22.

(For more biz stories, please visit Industry Updates)