Steel companies pin hopes on autos(2)

"In fact, the prices of automobile-use steel are not transparent and some special products' prices are even above the average," she added.

"Nevertheless, the net profits of such products will definitely decrease as the domestic production capacities increase and technologies improve."

"Many producers can make steel sheets for automobiles now after they introduced production lines from abroad, which may lead to overcapacity problems," said Zhang of Mysteel.com.

"From the technology perspective, Baosteel, Angang Steel Co and Wuhan Iron and Steel Co are leading players," Hu said.

Facing the promising market of automobile-use steel, Chinese companies started increasing their business in the sector by cooperating with foreign companies.

Following Baosteel, Ansteel was the second domestic company to start large-scale production of car panels when it cooperated with German industrial giant ThyssenKrupp AG in 2002. Their products target high-end car makers such as BMW and Volkswagen.

After developments in the past 10 years, the company will continue to focus on the research and development of steel products for automobile use, which are considered their core products, the company indicated on Dec 7 at a company seminar.

Shougang Group, one of China's top five steel companies, invested 6.4 billion yuan ($103 million) in building a cold-roll steel sheets production line in 2008. The production line has annual capacity of 1.5 million tons, targeting automobile use.

An anonymous officer at Shougang Group said the output of the production line's steel products for automobiles will not decline next year.

Shougang Jingtang United Iron Ore and Steel Co, a subsidiary of Shougang, will produce about 300,000 tons of automobile steel products this year, up 275 percent compared with last year, said Yang Chunzheng, deputy general manager of Shougang Jingtang.

"Because of the economic slowdown, the steel industry is suffering from losses caused by declining prices and overcapacity. Thus, many steel companies are turning to new products to make it through the tough times and the automobile sector is a trend," he said.

"Automobile steel is a growing sector with good profitability."

Shougang Jingtang produced 80,000 tons of automobile steel sheets in 2011, but the figure will grow to about 500,000 tons in 2013, according to Yang.

"Shougang is developing quickly toward high-end steel products, but its annual output of automobile-use steel sheets is not big and does not have a big influence on the market," said Hu. "Its advantage is in the steel market for electronic appliances. The same with Tangshan Iron and Steel Group Co, which is also following a similar path to become high-end and international."

Tangsteel has been trying to expand the overseas market, which is considered a tough path by analysts.

Hu said the export market of China's steel sheets for automobile use is not mature yet. Countries such as South Korea, Japan and Germany intend to use their own steel products.

"But it is always a good trend to explore the markets."

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.

"In the automobile-use steel industry, we should not only provide better quality, service and technology for our customers, but also individualized products to meet their special needs," said Tang Fuping, deputy general manager of Ansteel.

"I don't care too much where the steel from for my car comes from, domestic or overseas, but I do care whether it is light and strong enough," said Zhao Peng, who is planning to buy a car after he qualified last month through a lottery.

"In order to save costs, we are considering using domestic steel sheets to replace the imported products for future production," said a company insider of a large automaker in China.

"We hope that Baosteel can enhance its innovation and research to meet our needs for better quality and lower price," he said.

The strategic change by domestic auto producers is offering opportunities for related steel makers.

Even some foreign auto manufacturers are interested in Baosteel's products, industry experts said.

"It raises the costs and inventory risks to use imported steel sheets for production. That's why we are seeking local suppliers," said a European auto industry insider who declined to be named. "If Baosteel can accelerate high-end product research and development to solve our cost problem, we would love to become their loyal client."