ArcelorMittal, the largest worldwide producer of steel forecasts that demand for the metal would be buoyed by China, the world’s largest single automotive market, as the country prepares to boost internal car production by 60%.
The prediction underscores a move that is obvious in the automotive industry – the global automakers seek to tap increased local sales and earnings margins by localizing more of the car production in the country – allowing them to skip China’s import tarrifs.
Lakshmi Mittal, the company’s billionaire chief executive officer, which was present in Loudi, China for the opening of an automotive steel venture with Hunan Valin Steel, forecasted that steel output could rise – on the back of automotive demand – from 22 million units to 30-35 million units in a seven-eight years period.
“Automotive steel is the most profitable steel product with a fast and steady growth in demand,” said Sarah Wang, a Shanghai-based analyst with Masterlink Securities Corp.
ArcelorMittal’s new production facility in China makes the company a top rival to Baoshan Iron & Steel Co., which controls about 50% of China’s auto steel supply.
Data sourced from the National Bureau of Statistics shows that China’s car production in the January-May period exceeded 5.6 million autos, for a total vehicle production of 10.6 million units.