As per the reports given by Du Juan from China Daily, China’s steel industry is suffering from overcapacity and fading demand this year, whereas major producers are mainly focusing on the automobile market, which can bring higher profits. The lottery system allows people to purchase automobiles in first-tier cities and expanded to all major cities across the country; which is a big constraint for the country’s steel industry.
According to Zhang Tieshan, an analyst from steel information provider Mysteel.com, steel products for automobiles have been diminishing this year because of economic slowdown and the lottery policy and also said that due to macroeconomic conditions, the sales of heavy machinery vehicles have declined as compared to the sales of cars. He also added that, steel is the key material for automobile manufacturing which is about 85 percent of all materials for a heavy-duty vehicle and about 64 percent for a family car and hence, the sales of such steel products are closely related to the automobile market and most of the producers can make steel sheets for automobiles now after the introduced production lines from abroad, which might cause overcapacity problems
According to the China Association of Automobile Manufacturers, for the first 11 months, China’s automobile sales were about 17.5 million units, up only 4 % yearly.
Zhang also pointed out that economic slowdown and political disputes between China and Japan starting from late September have added to the negative impacts on the market. He also said that the companies producing steel products for exports are less influenced by domestic factors.
The market for automobile-use steel products still brings higher profits compared with the crude steel refining business, which attracts many Chinese producers to join the competition inspite of declining trends in 2012.
According to Hu Yanping, a steel analyst with Umetal.com, Baoshan Iron & Steel Co, is the country’s largest public steel maker, which motivates other major players to copy its strategy. The company has produced around 44 million tons of steel sheets for China’s automobile manufacturing industry in the past 20 years. Baosteel dominates more than half of the domestic market, with a current annual output of about 3 million tons of steel sheets for automobile use. Steel sheet products for electronic appliances cost about 4,400 Yuan a ton, and the ones for automobiles are priced at about 5,300 Yuan. The analyst also said that Baosteel, Angang Steel Co and Wuhan Iron and Steel Co are leading players.
The report says that, the Chinese companies in automobile-use steel market are increasing their business in the sector by cooperating with foreign companies. After more than 20 years of development for China’s auto industry, it has stepped into a period with a low but stable growth rate. The competition has forced automakers to put more emphasis on cost control rather than pursuing higher quality, which has brought new challenges as well as opportunities to steel sheet makers and also the tactical change by domestic auto producers is offering opportunities for related steel makers.