Cooperation Between Steel and Auto Sector Gets Mutual Boost

"It is never overmuch to say the relationship between steel industry and auto industry is close interdependent and mutual beneficial." Recently, Chi Jingdong, Vice General Secretary of China Iron and Steel Association, told the reporter that steel and auto industries, as two important pivot industries, have a wide range of fields, close correlation and great consumption driving power, therefore, to reinforce the industrial chain cooperation between the two parties will benefit greatly to each industry's stable and rapid development.

Currently, domestic auto market keeps a robust sale, the uprush of auto sales volume has provided a new chance for steel industry to broaden market, and the development of new energy and hybrid power autos have put forward the new requirement on steel products.

Inside analysts point out that the auto industry is becoming the important client of steel industry gradually, and the communication and cooperation between the two parties is being paid more and more attention to. Lots of enterprises in the two industries have had cooperation in such fields as product research and development, delivery and processing, and price fixing, which will not only help both parties avoid market risks at a maximum, but also help them increase innovation ability.

According to the latest statistics released by China Association of Automobile Manufacturers on October 13, driven by a set of national policies on expanding auto consumption, from January to September, 2009, both the output and sales volume of homemade autos have exceed those of last whole year, exceeding 9.6 million sets respectively and approaching the critical point of 10 million sets. Facing such an enormous market demand, domestic enterprises in steel industry have strengthened the strategic cooperation with the enterprises in auto industry successively. In this April, Shougang Group and Beijing Automobile Futon Vehicles Co. ltd had a strategic cooperation; in May, Changsha Automobile Plant, which is affiliated to Beijing Automobile Futon Vehicles Co. Ltd, inked an agreement with Hunan Valin LY Iron & Steel Co. Ltd, and both parties promised that the collaboration will be reinforced in many aspects, such as product research and development, manufacture, establishment of supply chain, whole processing and periodical contract management production and marketing connection, technological communication, market information, information system and cultural construction, so as to realize an efficient and seamless connection between auto industry and steel industry.

As understood, when developing new auto types, many overseas automakers require setting up teams with iron and steel companies to have a close cooperation in terms of steel's varieties, delivery and price. Data from China Iron and Steel Association shows that the localization rate of China's auto-used steel exceeded 90 percent in 2007. But viewing from auto type division, the localization rate of the steel used for mid-and-low-grade cars and trucks is comparatively higher while those steel plates used for mid-and-high-grade cars still need import in a large quantity; such varieties as part rod and wire for cars and trucks, gas valve steel for auto engines, cold-heading steel and easy-cutting steel used for some standardized parts and components with high intensity still need import. The demand on these products needs substantial support from domestic steel enterprises.

In fact, such giants in steel industries as Baosteel Group Co. and Angang Steel Company Limited have walked at the front in auto plate localization through several years' effort. At present, Baosteel has created proprietary technologies for auto plates, owned 40-odd patents, successfully developed 200-odd varieties, and realized the development from cold-rolling uncoated sheet steel to galvanized sheet, and from soft steel to high strength steel and ultra-high strength steel. Along with the increased adaptive capacity of varieties, more than 40 domestic auto plants have chosen to purchase Baosteel's products stably.

As for the cooperation between steel industry and auto industry aiming to further the industrial chain, Chi Jingdong made suggestions that both parties should cooperate based on the principle of sharing information, integrating resource, jointly tackling key problems, and realizing win-win. On the one hand, what steel industry shall do is to master the demand, market information and requirement on components and parts in auto industry, follow close the development pace in auto industry, and adapt to users' development demand. It's also necessary for auto industry to understand the information of steel industry, such as technical level and production strength. On the other hand, both parties shall realize contact and cooperation in terms of research and development, logistics, output and sale, etc. For instance, both parties can improve good supply manners, decrease logistics cost and increase enterprises' competitiveness in the market.

As introduced, in the current strategic cooperation between steel enterprises and auto enterprises, Baosteel Group Co. and Dongfeng Nissan Passenger Vehicle Company performed well. The strategic cooperation between two parties includes such fields as product research and development, production, variety establishment, quality testing, quality service, marketing, trade, logistics, coil of strip processing and delivery, which can be called a cooperation of multilayer relating to operation, execution, management and decision-making.