Well before consulting firm Drucker Worldwide estimated 18 per cent of
vehicles would sport all-aluminium bodies by 2025 (compared with one per
cent currently) or Ford Motor announced its popular F-150 pick-up truck
would have an aluminium alloy body, ArcelorMittal was busy negotiating
the emerging competition from the white metal and its composites.
The company has much in stake in the automotive sector. Last year,
supply of 13 million tonnes (mt) to major vehicle manufacturers gave
ArcelorMittal market share of 17 per cent and revenue of about $12
billion. It has dedicated half its research and development laboratories
across the world to development of new-generation automotive steel,
which is lighter but stronger. Automobile companies are under increasing
pressure to make vehicles lighter, as regulators in many countries have
set stiff fuel economy targets to curb carbon emissions. In the US,
manufacturers must ensure five per cent annual improvement in vehicle
fuel efficiency by 2025; failure to adhere to this will draw stiff
penalties. The urgency to reduce vehicle weight has led to an ideal
environment for aluminium, which is more expensive than steel, in the
automotive sector.
As expected of ArcelorMittal, the company took the emerging competition
from aluminium and other alloys by the horn. What took the wind out of
aluminium makers' sails was ArcelorMittal chief Lakshmi Mittal's
assertion that claims of the white metal having an edge over steel in
terms of weight were based on "outdated data". He further claimed
new-age steel provided "all the weight reduction" automakers needed to
conform to the increasingly stringent fuel efficiency norms. He added in
the past 20 years, steel strength had increased 10 times, "from 170 to
1,700 megapascals. And, we don't know where the limit is in terms of
product development". Along with breakthroughs in automotive steel
products development, ArcelorMittal took steps to have manufacturing
footprint in places where the automotive sector was set to expand.
China, which raised vehicle production by 7.3 per cent to 23.723 million
units in 2014 (according to global automakers body OICA), will remain
the auto sector's best bet for growth, along with India.
As China didn't encourage 100 per cent foreign
ownership of steel plants, the next best option for ArcelorMittal was
to find a local partner with a large production base but short on
new-generation automotive steel technology. ArcelorMittal joined hands
with Hunan Valin Iron & Steel, forming a joint venture (JV).
Commissioned in mid-June last year, the 1.5 mt JV plant at the Loudi
economic zone in Hunan province incorporates the "most advanced
automotive steel technology" available with ArcelorMittal. As the JV
production proved to be a substitute for import of high-end auto grade
steel, it is allowing foreign and domestic auto groups to make "lighter,
safer and more environment-friendly cars". In its quest to fill the
gaps in potentially large auto steel markets, ArcelorMittal, in an equal
partnership with Nippon Steel & Sumitomo Metal, bought a 5.3 mt
finishing mill in the US from ThyssenKrupp. The facility will allow the
JV to seize a major share of the auto steel market in southern US.
India has remained a missing link in the ArcelorMittal auto steel chain.
This is unviable for the company, as India is to emerge as the world's
fourth-largest automobile manufacturer by 2020. The automobile and
upstream steel segments are focus areas of the government's 'Make in
India" programme.
ArcelorMittal is to make an entry into India's auto steel segment
through a JV with Steel Authority of India Ltd (SAIL). The JV is to
build a cold rolling mill and downstream finishing facilities. Its
materialisation will be a major achievement for SAIL Chairman Chandra
Shekhar Verma, who is engaged in raising the share of high value-added
steel in the company's product portfolio. Verma says the JV should be
"seen as part of a broader SAIL plan to reduce the country's dependence
on import of high-end steel. The JV is ideal to induct auto grade steel
technology which is the preserve of a few globally".
NEW FRONTIERS
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Regulators in many countries have set stiff fuel economy targets to curb carbon emissions
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ArcelorMittal has dedicated half its R&D labs across the world to development of new-generation automotive steel
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Urgency to reduce vehicle weight has led to an ideal environment for aluminium in the automotive sector
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As China didn't encourage 100% foreign ownership of steel plants, ArcelorMittal formed a JV with Hunan Valin Iron & Steel
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The steel major is also set to make an entry into India's auto steel segment through a JV with SAIL
