Business Standard reported that the geographical shift in steelmaking capacity to emerging economies since the 70s has now picked up greater force in the automobile sector.
In the global steel production of 1.607 billion tonnes in 2013, the share of Asia (1.08 billion tonnes) was 67.3%, thanks largely to China with output of 779 million tonnes. As in steel, in the global automobile segment, too, China dominates.
Last year, it accounted for production of 22.17 million units out of the global output of 87.3 million units. The geographical shift is best illustrated by a study that says in the expected global market growth of 33 million cars between 2007 and 2020, as many as 32 million units are to come from developing economies. That China will have the largest share in that growth is a given.
Through the past couple of years, India’s steel and automobile sectors could not perform to their potential because of the economy’s sub-five per cent growth. Consulting firm Booz & Company, however, says through the next 20 years, India will be part of the automobile space’s global big three along with China and the US.
It adds auto sales here will exceed the US market by the mid 2030s. Many in the industry may not agree but Mr Chandra Shekhar Verma chairman of Steel Authority of India Limited remains steadfast in his belief that India could more than triple its steel capacity to 300 million tonne by 2025, in which my company’s share would be 50 million tonne.
The enormous geographical shift is the reason why the Laksmi Mittal led ArcelorMittal has joined hands with Hunan Valin to build a plant in China’s Hunan province to make ultra high strength auto steel, for which that country is import-dependent. China has an estimated steel capacity of one bt, but lacks technologies Mittal has given to joint venture Valin ArcelorMittal Automotive Steel (Vama).
In fact, technologies to make auto steel, which is exceptionally strong but also light (body in white) are available with only a few steelmakers in Japan, Europe and the US. Naturally, they will share such technologies, the result of millions of dollars of investment in research and development, with foreign firms on terms favourable to them. It took TATA Steel much effort to partner Nippon Steel in a cold rolling venture at Jamshedpur for making high grade auto steel.
The sheer size of the automobile segment in China and the fact that it is the world’s fastest growing market for cars and commercial vehicles have been a big draw for ArcelorMittal.
Mittal said that auto sector operates on global platforms and carmakers will increasingly function the same way in China as they do in the US. Carmakers in the US, Japan and Europe that use ArcelorMittal auto steel in several parts of the world wanted the world’s largest steel producer to build a plant in China.
According to Mittal, it is a distinct advantage for the likes of General Motors, Volkswagen and Toyota to be supplied steel by the same entity in different locations across the globe, as they are guaranteed exactly the same product made to exactly the same quality standards.
Source – Business Standard