In the last part of this series, we discussed ArcelorMittal’s (MT) automobile strategy. An important pillar of this strategy is the company’s expansion into emerging markets. Recently, it signed an MOU (memorandum of understanding) with an Indian (EPI) steel company to study the feasibility of creating a joint venture. The new venture would produce automotive-grade steel products. It would be stationed in one of the major auto clusters in India.
In India, demand for auto sheet products is expected to increase sharply over the next few years. By 2022, vehicle production in India is expected to double from the current levels. Globally, the country is expected to be the fourth largest automaker by that year. It would produce over 7 million units annually.
Ford (F) already signaled that it plans to use India as an export hub. It’s even looking at exporting vehicles manufactured in India to its core market of North America.
Chinese joint venture
Although Chinese (FXI) automobile demand has slowed down, it still remains one of the fastest growing markets. The above chart shows the expected growth rate in Chinese vehicle production.
ArcelorMittal’s Chinese joint venture has commenced commercial production from 1Q15. The plant will have an annual production capacity of around 3 million tonnes. The plant will produce steel for high-end applications in the automotive industry. From this plant, ArcelorMittal hopes to supply steel to international automakers and first-tier Chinese car manufacturers.
Before we analyze what other steel producers, like U.S. Steel (X), are doing to expand their automotive solutions, we’ll analyze why a sense of urgency has crept into steel companies.