China’s automobile sales
We discussed China’s real estate sector in the last part of this series. Now, we’ll analyze the indicators for China’s automobile industry. This sector is the second biggest steel consumer in China. China is the world’s biggest automotive market. More than 20 million vehicles are sold in China each year.
The above chart shows the year-over-year, or YoY, growth rate in passenger car sales in China. As you can see, the growth rate dipped to 4.66% in November 2014. However, the growth rate jumped back sharply to 15.99% in December. Vehicle sales increased by 21.47% in December 2013.
ArcelorMittal (MT) is set to enter China through its joint venture, or JV, with Hunan Valin. The JV will roll out the first coil in 1Q15. This plant will cater to the automobile industry. AK Steel (AKS) is a leading supplier to the US automobile industry. It gets more than half of its revenue from the automobile industry. Recently, U.S. Steel Corp. (X) restructured its management team. It hired an automobile industry expert to head its automotive sales.
A positive sign
The rise in vehicle sales in China is positive for the steel industry. It would lead to higher steel demand from the automobile industry. Steel has been the material of choice for automakers. However, automobile companies also showed an inclination to produce vehicles with an aluminum body.
Investors should also track automobile sales in Europe. We’ll discuss this in the next part of this series.