China's auto steel demand seen growing 9-10 pct per year - ArcelorMittal

Thu Jul 25, 2013 4:21am EDT

* Auto sheet imports likely to decline

* China's auto sheet demand to grow 1-1.5 mln T/yr

* Big portion of growth from central and western China

* China's auto production likely to hit 20 mln units in 2013

By Ruby Lian and Fayen Wong

SHANGHAI, July 25 (Reuters) - ArcelorMittal SA, the world's largest steel producer, expects China's automotive steel demand to grow 9-10 percent annually over the next few years as China boosts auto production, a company executive said on Thursday.

"Demand for auto sheet in China reached 13-14 million tonnes last year and we see growth of 1-1.5 million tonnes per annum in coming years," said Sanjay Sharma, general manager of ArcelorMittal.

ArcelorMittal and China's Hunan Valin Steel Co set up an automotive steel joint venture called Valin ArcelorMittal Auto Steel Co Ltd in 2010 in order to tap growing demand from China's auto producers.

"China still lacks top-quality auto steel and we are aiming to make products of higher strength but lighter," said Wang Jun, the joint venture chairman and an executive with Valin.

Wang expects a big portion of growth to come from the central and western China regions as some large automakers like German carmaker Volkswagen and China's BAIC Group are planning to build factories in Hunan province.

Though saddled with overcapacity, China still imports about 1-1.5 million tonnes per year of high-end automotive steel from Japan and South Korea from companies like Nippon Steel & Sumitomo Metal Corp.

"The market is changing and moving to higher-end...the market has a shortage and will still have to import, but the import volume will be going down and it will be imports of very high-end products still from Japan and South Korea," said Sharma, also the chief executive of the joint venture.

The joint venture, VAMA, 51 percent owned by Hunan Valin Steel Co with ArcelorMittal taking the rest, has an annual production capacity of 1.5 million tonnes and is expected to start production in mid-2014.

The company aims to gain about 10 percent domestic market share by 2016 when China's automotive steel demand reaches about 16-17 million tonnes.

Auto production in China, the world's top automaker, is likely to hit 20 million vehicles this year and 35 million vehicles by 2020. The first-half output jumped 15 percent on year to 11.57 million vehicles, according to data from the National Bureau of Statistics.

ArcelorMittal also holds a 24.97 percent stake in Hunan Valin Steel Co, owned by China Hunan Valin Group, and is the only Chinese state-owned steel mill with foreign ownership.

China's leading autosheet producers are Baoshan Iron & Steel , which accounts for more than half of the domestic market share, with Angang Steel Co Ltd, Shougang Co Ltd, Wuhan Iron and Steel Co Ltd supplying the rest. (Editing by Matt Driskill)