New vehicle energy consumption standards make China thirsty for Japanese steel

According to Japanese media, the company invested about 29 billion yen in the establishment of a new factory in cooperation with Anshan Iron & Steel, China's largest steel company. It is expected that high-quality light-duty high-tensile steel plates will be produced starting from 2016. "To meet the needs of local growth, it is time to wait."

Japan's Nikkei Business Weekly published an article in a journal on November 4. According to Vice President Yamaguchi Yuguang, "China's future demand for high-tensile steel plates will grow explosively," not only in Japan where cars are produced in China. Business needs, other Chinese companies also need.

Due to the outbreak of anti-Japan demonstrations in many Chinese cities last fall and the subsequent boycott of the Japanese goods movement, many Japanese companies are cautious about large-scale investment in China. In the context of the anti-Japanese wounds that have not yet healed, the steel giants have already begun to regroup.

Nippon Steel & Sumikin announced on September 5 that it will invest about 17 billion yen in a joint venture with China Baosteel to strengthen the production of high-tension steel plates. According to the plan, the newly established company will introduce a production line that can produce high-tensile steel plates of 980 MPa, which was not yet available in China.

Why do large Japanese steel companies come to invest in factories in China?

According to the report, with its unique heat treatment technology, Japan's high-tensile steel sheets are light, thin, strong, and easy to form. Normally, nearly 1 ton of steel is required to produce a car. If high-tensile steel plates are used, the weight can be significantly reduced. A steel company clearly stated that the decision to invest in China is a requirement of local automobile manufacturers. The use of high-tensile steel plates in large quantities is also considered to be a key measure to cope with China's increasingly stringent fuel consumption standards.

Japanese products that attract China's attention are not limited to high-strength steel sheets, but also include aluminum materials that contribute to lighter weight.

Two weeks before the Kobe Steel Group announced the establishment of a joint venture plant, it had decided to invest 19 billion yen in aluminum production in China. The strength of aluminum is a problem, but Kobe Steel also realizes that the aluminum material is both light and tough. At present, the main customers are concentrated in European and American companies that produce high-grade cars in China.

According to the report, the Chinese new fuel consumption standard that led auto companies to adopt high-tensile steel sheets and aluminum materials is the so-called "2015 issue." After the announcement of the new plan this spring, not only local companies but also foreign companies have been shaken.

So far China's fuel consumption standards are more relaxed than Japan and the EU. However, the new cars that have been sold since January 2015 will be replaced by the “General Corporate Fuel Economy Standard (CAFE Standard)” currently being implemented in Europe and the United States. And plans to reach the standards of Japan and the European Union by 2020.

In other words, starting from 2015, no matter which company produces cars, its average fuel consumption per 100 kilometers needs to be controlled at 6.9 liters, and by 2020 it will further drop to 5.0 liters.

The report pointed out that as long as we look at the Chinese government's average fuel consumption figures announced on September 22, we know how difficult it is to achieve this goal. The average fuel consumption per 100 km of the 83 companies announced was 7.42 liters, which is far from the required value in 2015.

Even Japanese car makers known for their fuel economy are unable to accomplish this goal. The average fuel consumption of FAW Toyota is 7.67 liters/hundred kilometers, Dongfeng Nissan is 6.95 liters/hundred kilometers, and Guangzhou Honda is 7.69 liters/hundred kilometers. The situation of local companies is even worse.

According to reports, the main reason for the Chinese government to introduce strict standards is air pollution. Since this fall, apart from Beijing, Harbin, the provincial capital of Heilongjiang Province, has also experienced severe hazy weather. This not only affects the health of the residents, but also has an impact on economic activities. The rising public dissatisfaction may even affect foreign investment in China, which also forces the Chinese government to come up with countermeasures.

Taking into account the employment and economic growth, as well as the difficulty of implementing pollution control measures, compared to coal, the government is still more willing to take the auto industry first. Reducing the weight of automobiles has undoubtedly become a necessary condition for the survival of Chinese car companies. This is why China “gets the materials produced in Japan anyway”.

The report said that the direction of Sino-Japanese relations is not yet clear, and anti-Japanese demonstrations and boycotts of Japanese goods may also make a comeback. How to achieve business growth in China in such a context is also a cause for many Japanese companies to scratch their heads. The strategy of the iron and steel giants to turn China’s difficulties into business opportunities may prompt more people “to evade anti-Japanese risks”.

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