Steel companies pin hopes on autos

For the first 11 months, China's automobile sales were about 17.5 million units, up only 4 percent year-on-year, according to the China Association of Automobile Manufacturers.

Workers assemble cars at an automobile factory in Chongqing, Southwest China. Steel is the key raw material for automobile manufacturing and accounts for about 85 percent of all the material in a heavy-duty vehicle and for about 64 percent in a family car. Xu Yongping / For China Daily

Since late 2010, customers in Beijing have to apply for a government-operated draw for a license plate before purchasing a car. The municipal government allows 20,000 new plates a month, about one out of 70 who apply.

Other big cities such as Shanghai carried out similar policies to reduce carbon emissions and encourage green transportation.

"The economic slowdown and political disputes between China and Japan starting from late September have added to the negative impacts on the market," Zhang said.

He said companies producing steel products for exports are influenced less by domestic factors.

Despite the declining trend this year, analysts said the market for automobile-use steel products still brings higher profits compared with the crude steel refining business, attracting many Chinese producers to join the competition.

"It's proof of the advanced manufacturing technology by producing high-end steel products for automobile use," said Hu Yanping, a steel analyst with Umetal.com. "Plus Baoshan Iron & Steel Co, the country's largest public steel maker, has had a great performance in the sector, which motivates many other major players to copy its strategy."

The company has produced more than 44 million tons of steel sheets for China's automobile manufacturing industry in the past 20 years, according to Umetal.com.

With a current annual output of about 3 million tons of steel sheets for automobile use, Baosteel dominates more than half of the domestic market, according to Hu.

Common-use steel sheet products for electronic appliances cost about 4,400 yuan ($698) a ton, while the ones for automobiles are priced at about 5,300 yuan, she said.

"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.

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