ArcelorMittal taps into China’s booming market for growth

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By Fayen Wong

Loudi CHINA – ArcelorMittal, the world’s top steelmaker, said on Sunday it would use its joint venture to tap into the country’s fast-growing car , helping offset slackening steel demand on the back a slowing economy.

The company’s joint venture China’s Hunan Valin Steel Co starts operation this month, an annual production capacity 1.5 million tonnes, including hot and cold-rolled coils, and parts such as chassis and wheels.

“Demand for autos China will continue to grow. Today, China produces about 20 million cars per year … so there is demand for these kind niche , like the ultra light-weight auto steel,” Lakshmi Mittal, the company’s , told Reuters an interview central Hunan province.

China became the world’s biggest auto five years ago, annual sales growing nearly 14 percent last year to smash the 20 million mark, thanks to a burgeoning middle-class that is eager to spend.

ArcelorMittal, which set up the Hunan joint venture 2010 to high-end automotive steels, said it has no further short-term expansion plans Asia or elsewhere, despite steel demand gradually recovering the U.S. and Europe.

“We don’t to grow our capacity in our . We will supply more steel to Europe and America by increasing our utilization,” he said.

Although China’s steel sector, the world’s largest in terms of capacity and consumption, is already plagued by gross over capacity, there is still a shortage of high-end automotive steel.

Imports from and South Korea hover between 1.5 million to 2 million tonnes per year. ArcelorMittal previously supplied steel produced outside of the country to automotive manufacturers in China.

Mittal said the Hunan venture would supply steel to international car makers and domestic players such as Geely Automotive Holdings, Dongfeng Motor Group and Shanghai Auto.


China’s huge automotive steel is critically important to foreign , which have looked to its rapid growth to compensate for flagging sales in Europe. But laws requires foreign steel makers to team up local partners.

South Korea’s POSCO, which an 8 percent growth in the auto sector in its 2013 results, has also partnered with Chongqing Iron and Steel Co to build a 3 million tonnes per year auto steel plant in western China.

Despite a buoyant outlook for China’s auto steel demand, some analysts have said that any stronger-than-expected growth for electric vehicles, which use more aluminium for car bodies, could take some shine out of steel consumption.

China had set a target of selling over 5 million electric cars by 2020, which would account for about one-seventh of all vehicle sales in the country if realized.

The move by Ford Motor to use aluminium for most of its F-150 truck has also renewed debate on whether aluminium would increasingly replace steel in the auto market.

“My position is that steel has the total solutions for the car industry … which is lighter, stronger and safer material that can meet all these standards of the car industry,” said Mittal. (Reuters)