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HomeAll NewsMost read newsBusiness Leaders Biography
Birthday : 06/19/1950
Place of birth : Rajasthan - India
Biography : Mr. Lakshmi Niwas Mittal is a Chairman at Aperam SA, an Independent Director at The Goldman Sachs Gr

ArcelorMittal taps into China's booming market for growth

06/15/2014 | 12:23pm EDT

Loudi CHINA (Reuters) - ArcelorMittal (>> ARCELORMITTAL), the world's top steelmaker, said on Sunday it would use its Chinese joint venture to tap into the country's fast-growing car market, helping offset slackening steel demand on the back of a slowing economy.

Loudi CHINA (Reuters) - ArcelorMittal (>> ARCELORMITTAL), the world's top steelmaker, said on Sunday it would use its Chinese joint venture to tap into the country's fast-growing car market, helping offset slackening steel demand on the back of a slowing economy.

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

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

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

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

"We don't need to grow our capacity in our business. 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 Japan 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 (>> Geely Automobile Holdings Ltd), Dongfeng Motor Group (>> Dongfeng Motor Group Co. Ltd) and Shanghai Auto.

GOING ELECTRIC

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

South Korea's POSCO (>> POSCO), which reported an 8 percent growth in the auto sector in its 2013 results, has also partnered with Chongqing Iron and Steel Co (>> Chongqing Iron & Steel Co., Ltd.) 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 (>> Ford Motor Company) 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.

(Reporting by Fayen Wong; Editing by Sophie Hares)

By Fayen Wong


© Reuters 2014
Stocks mentioned in the article
ChangeLast1st jan.
ANGANG STEEL COMPANY LIMITED 9.83% 5.03 End-of-day quote.65.46%
ARCELORMITTAL -0.91% 29.375 Real-time Quote.55.59%
BAOSHAN IRON & STEEL CO., LTD. 9.54% 7.92 End-of-day quote.33.11%
CHONGQING IRON & STEEL COMPANY LIMITED 5.49% 2.69 End-of-day quote.81.76%
DONGFENG MOTOR GROUP COMPANY LIMITED 1.18% 6.88 End-of-day quote.-23.89%
FORD MOTOR COMPANY -3.06% 13.95 Delayed Quote.58.70%
GEELY AUTOMOBILE HOLDINGS LIMITED 1.57% 25.95 End-of-day quote.-2.08%
HUNAN VALIN STEEL CO., LTD. 9.39% 7.69 End-of-day quote.60.88%
LETS HOLDINGS GROUP CO., LTD. -0.64% 6.18 End-of-day quote.-20.57%
NL ANTILLIAN GUILDER / NL ANTILLIAN GUILDER (ANG/ANG) 0.00% 1 Delayed Quote.0.00%
POSCO 2.09% 366500 End-of-day quote.34.74%
TEAM, INC. 2.49% 6.17 Delayed Quote.-43.39%