Valin ArcelorMittal Automotive Steel Co Ltd officially opened its first automotive steel plant in China on June 15, marking a new milestone in China's automotive industrial chain.
The company known as VAMA is a 51-49 joint venture between Valin Steel Co Ltd in Hunan and ArcelorMittal, the world's leading steel and mining company headquartered in Luxemburg.
Located in Loudi, Hunan province, VAMA was approved by the National Development and Reform Commission and the Ministry of Commerce. Total investment in the venture will reach 5.2 billion yuan ($832 million), said the company.
VAMA will produce high-strength auto steel to meet fast-growing demand in China. Its annual production capacity of around 1.5 million tons will include cold-rolled, galvanized and hot-dip galvanized coil steel.
"In recent years, between 1.5 million and 2 million tons of auto sheets were imported annually, and VAMA aims to target this market demand through import substitution," said Sanjay Sharma, CEO of VAMA.
"About 45 percent of Chinese vehicles use high-strength steels such as those VAMA will be producing at our factory in Loudi," Sharma said.
He said VAMA's high-strength steel products allow for thinner, stronger steel to be used in automotive manufacturing, reducing total weight by up to 19 percent and carbon emissions by 14 percent through the lifetime of the vehicle.
Wang Jun, chairman of VAMA, said the joint venture "enjoys great support from all stakeholders including the government, suppliers and the local community".
"Everybody agrees that this is an essential project to further contribute to the high-quality development of the automotive industry in China.
Jiao Guohua, chief operating officer of the joint venture, said "hot coil from VAMA will be made of Lianyuan Steel, another subsidiary of Valin Steel at Loudi".
"Building the factory in Central China's Loudi brings VAMA close to suppliers of raw materials and provides a central location to supply our products to automakers throughout the country."
Hunan province has attracted a number of automotive enterprises such as GAC Fiat, GAC-Mitsubishi, BYD, and Geely, as well as other automotive suppliers including Bosch.
Jiao said VAMA plays an important role for the future by adding an important element to the local automotive value chain - automotive steel. Its sales are expected to reach 10 billion yuan by the end of 2016.
"Steel makes up less than 10 percent of a vehicle's total cost, so automakers are not that sensitive to the price of steel," said Sharma.
"Automakers are more concerned about quality of product, time of delivery and service levels, and the establishment of the steel plant here means that we can provide services to automakers more quickly, probably just on a short notice."