“We are optimistic about Chinese market which has strong demands and a large scale.” On November 1, at the kick-off ceremony of GONVVAMA, Changshu, Jiangsu Province, Mr. Jon Riberas, President, Gonvarri said in an interview with the journalists from The Economic Observer. “Though the growth in Chinese automotive market is not so rapid now, it is very fast on the global scale, especially in the high-end automotive steel.”

 

VAMA Gonvarri Advanced Automotive Steel Solutions Co., Ltd. (GONVVAMA) is an equal-share partition joint venture between Valin ArcelorMittal Automotive Steel Co., Ltd. (VAMA) and Gonvarri Steel Services. ArcelorMittal is currently the global No.1 steel production and solutions supplier. With the success of VAMA in China, ArcelorMittal decided to extend its supply chain so as to better bring its downstream technologies to Chinese market. A new joint venture, GONVVAMA, was thus created to offers the automotive steel solutions to Chinese customers.

 

Headquartered in Changshu, Jiangsu Province, GONVVAMA is currently operating 4 advanced automotive steel plants in Changshu, Hunan Province, Shenyang, Liaoning Province, Chongqing, and Loudi, Hunan Province. Amonst others, Loudi Plant was put into operation in the end of 2016, Shenyang Plant was put into operation in the first half of 2017, and Chongqing and Changshu plants are put into operation in this November, allowing GONVVAMA to cover the major automotive clusters in China.

 

“We do not directly compete with Chinese local automotive makers. Instead, we only target a niche market in which Chinese counterparts cannot match us, or are catching up with us.” Jon Riberas told its market strategy to the journalists with The Economic Observer. “Though the price is important, we have our own competition advantages, and enabling us take our position in the competition rather than get affected by the price factor.”

 

As the joint venture partner of GONVVAMA, VAMA is capable of supplying various steel grades ranging from low-carbon steel to ultrahigh strength steel, especially hot stamped steel, such as Usibor®2000 and Ductibor®1000. GONVVAMA has the technologies transferred by ArcelorMittal, enabling it to use the most advanced manufacturing technologies to produce cold stamped and hot stamped steels, including Usibor®2000 and Ductibor®1000, irregular shape blank and laser welding parts made of the 3rd generation of ultrahigh strength pressure hardened steel, as well as automotive exposed board. “As the extended supporter of VAMA’s downstream industry chain, GONVVAMA focuses on the integrated forming of hot stamped steel, advanced high-strength steel, ultrahigh-strength steel and exposed steel plates, and processing service of laser welded parts (LWB) with a view to providing quality products and integrated technical service solutions to automotive manufacturers.” Jon Riberas indicated that the increasingly stringent regulation in China has brought development opportunities to the company.

 

At present, China government requests the automotive manufacturers to drastically improve the fuel efficiency in China’s car fleet by 2020 with the target to reach an average consumption of 5 litres per 100 kilometers. A further target of 4.5 litres per 100 kilometers is anticipated for the period after. In addition, China wants to achieve Euro 6 by 2020. China is also promoting electric vehicles (EVs), thus imposing higher requirements for automotive weight reduction.

 

Moreover, China is also upgrading the automotive safety standards. It is reported that new crash management standards will be in place in China by 2018, raising the requirements here to match those of the US. “So the challenge for automotive makers is to match the regulation but to do so within the very short timescale set by the authorities. For us, this is a good development opportunity.’’ Said Jon Riberas. “These different steel grades have been widely used in Chinese market, helping automotive makers achieve stringent crash safety, weight reduction and emission reduction targets.”

 

Jon Riberas especially mentioned the EV market prospective in China. In his opinion, advanced high-strength steel (AHSS) is playing a more and more important role in EV manufacturing area, especially in China market. As for EV design, weight reduction of this type is of great importance since battery itself has accounted for a large portion of total vehicle weight. Replacing original internal combustion engine with heavier one allows significant changes to be made to the body weight and balance but pose new challenges in crash management. In the same time, battery and battery pack also need stronger safety and crash protection.

 

“These factors will greatly facilitate the application of AHSS to ensure the safety while achieving weight reduction”. Jon Riberas indicated that ArcelorMittal Global R&D and GONVVAMA have been developing specific S-in motion® solutions on electric vehicles in response to China regulations. Such solutions, integrating the most advanced AHSS and hot stamping grades, help customers to achieve excellent crash safety performance with considerable weight saving and nearly no added cost.

 

Data shows that automotive steels account for a share of approximately 6% in total steel consumption in China while sheets account for over 70% of automotive steels. It is estimated that automotive steel consumption is about 45.34 million tons in 2016. If such factors as loss in automotive parts processing are taken into account, total demand for automotive steel in 2016 is about 58 million tons. As the high-profit product in steel grades, automotive steel also attract more and more steel and iron enterprises to get involved in the segment thanks to rapid development of the automotive sector in the past two years and constant growth of the market. Especially, the segment of medium- and high-end automotive steel is gradually challenged and coveted by a great number of large domestic steel enterprises.

 

Currently, several enterprises including BAOSTEEL, TISCO, ANSTEEL and Valin have stepped in this segment. In the meanwhile, joint ventures between domestic steel enterprises and international steel giants are often seen. In addition to the joint venture between Valin, ArcelorMittal and Gonvarri, Germany steel giant Thyssenkrupp created a joint venture with ANSTEEL in 2015, establishing a hot galvanizing line in Chongqing to consolidate its position in hot galvanized steel for China’s automotive industry. In 2015, Chongqing Iron & Steel (Group) Co., Ltd. established a steel factory with POSCO, announcing its entry into the segment of medium- and high-end automotive steel.

 

The trend of joint venture of steel factories is also affected by China’s policies. Two foreign shareholders of GONVVAMA consider that in the context of structural reform in supply front, China government hopes the transition of China’s automotive industry from pure manufacturing to a high-tech industry, and domestic enterprises should grasp more critical emerging technologies that drive the development of the industry. The latter is well responded in China’s domestic automotive manufacturers since the government conveys a strong signal to them, requesting them to improving the technological content of the products as developed and sold.

 

“China government hopes that various solutions and products can be available in China, and that the automotive sector can try its best to be self-sustained in innovation and supply rather than rely on import.” One of senior management of GONVVAMA said.

 

However, for steel plants, the development of new automotive technologies and materials also bring about actual pressure. At present, the light weight trend is obvious, and light-weight materials are widely used, including low-density light-weight materials such as aluminum alloy, magnesium alloy, titanium alloy, carbon fiber reinforced plastic. So, how can steel plants respond to the trend? “Compared with other materials, high-strength steel is currently the most economic and feasible material to realize weight saving. Steel will remain the most primary raw material for automotive.” Brian Aranha, Arcelor-Mittal Global R&D Vice President, told to The Economic Observer.

 

According to his calculation, it may cost 8-9 euros (approx. RMB 60-70) to realize a weight saving of 1kg for steel material, while carbon fiber may have a cost of about 30 euros. In terms of cost, steel is the most cost effective material. According to him, steel should have best environment protection effect without any damage to the environment and always under control in the production and subsequent use.

 

However, as the part with huge cost in automotive manufacturing, steel producers are also faced with a great development pressure. China’s automotive market is now undergoing a slowing growth while fierce competition has resulted in gradually decreasing car price year after year. For OEMs, further cost reduction is a must to keep their competitiveness, especially for steel plants. As for how to maintain the profitability, Jon Riberas indicates that medium- and high-end steel currently has competitive advantages and its segment has great potential in the long run.

 

But global automotive market is also faced with drastic change. Recently, Kobe Steel Ltd., a Japanese famous iron and steel producer, conducted data falsification, involving over 500 global enterprises. Moreover, Japanese car makers are questioned with respect to quality safety. Currently, Kobe Steel Ltd. is in a dilemma in its operation. For other steel producers, Kobe Steel Ltd. may create a large blank market due to its scandal. This may not only bring an opportunity to take the market share for global steel producers, but also result in the changes in global automotive steel market landscape.