China’s emerging automotive might a challenge for steel

Steel Business Briefing, October 8, 2010

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Soaring automotive demand in China – which saw January-June sales jump 48% year-on-year to 9.03m units – presents opportunities and challenges for global steelmakers.

Bill Russo, senior advisor to consultants Booz & Company, notes that car sales in China reached 13.64m units last year and seem set to reach 17m this year, another record high.

“China will become the world’s largest auto market – forever!” Russo told delegates at the World Steel Association conference in Tokyo this week, attended by
Steel Business Briefing.

Arguing that when a country’s threshold of mobility lies near $10,000 of GDP per capita automobile ownership accelerates, he said: “China is just hitting the rapid growth phase now.”

At China’s current rate of development and fuel consumption, by 2020 the country will have over 150m vehicles on its roads and petroleum consumption will exceed 250m tonnes. Russo says Beijing is aware of the environmental implications of this and is working to promote development of fuel efficient cars, electric vehicles and other technologies.

The implication for the world steel industry, Russo argued, is that steelmakers must cease seeing themselves as mere suppliers of steel and become closer partners with car companies, which are increasingly relying on steel mills to deliver advanced vehicle technologies.

For example, he notes that by 2015, Chinese steelmakers will be supplying 71% of a car’s body structure, compared with just 45% today. Russo cited the example of Baosteel’s partnership with Chinese automakers, including Geely, Chery, Dongfeng and Chongqing Chang’An in a RMB 500m ($75m) project to develop stronger and lighter materials.

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