In the first of a four-part series on ArcelorMittal's automotive strategy, Brian Aranha, head of global automotive and commercial coordination, explains how the company continues to expand its global footprint to capture future automotive demand growth.

Above: orange shows ArcelorMittal automotive production facilities; grey shows alliances and joint ventures; green shows commercial teams

ArcelorMittal is the largest supplier of steel to the automotive industry, with a 17 per cent share of the worldwide market. This isn't a chance occurrence - it's the result of many years spent developing our leadership position and investing in our product portfolio and production presence.

But ArcelorMittal isn't a company that rests on its laurels. What's more, to use a sporting analogy, it's very difficult to reach the number-one position, but it's even harder to remain there. That's the challenge we face now.

And the solution is not simply a case of continually evolving the steel solutions we provide to stay one step ahead of competition from other steel producers and alternative material producers. This is vital, of course, and we believe we do it better than anyone else. But equally important is being aware of global automotive market

Above right: the Peugeot 308, 2014's "Car of the Year ", features ArcelorMittal steel

trends, and ensuring our global footprint is appropriately aligned to those trends, so we maximise the commercial opportunity they present.

If we look at developed markets, a clear set of trends emerge. It's clear that North America and Europe have recovered from the financial crisis, when vehicle production rates hit a trough in 2009, after a significant two-year fall. The recovery has been more pronounced in North America, which is not surprising given stronger economic conditions in the region. Vehicle production hit almost 14 million units in 2014, exceeding pre-crisis levels in 2007 and demand is expected to stabilise at these levels for the foreseeable future.

It's a slightly different picture in Europe, largely due to the weaker economic recovery. We don't foresee vehicle production levels returning to pre-crisis levels until 2017, but then, in contrast to North America, we see further growth potential beyond that timeframe.

We have invested heavily to ensure we have not only defended, but have further developed our position in these developed markets. In 2012, for example, we could only produce Usibor®, our hot-formed steel grade for use in automobile structural and safety components, at our Mouzon site in France, and at Indiana Harbor in the USA. Since then, we have increased our Usibor® capacity by 136 per cent, and now produce it in Dudelange (Luxembourg), Florange (France), Sagunto (Spain), AM/NS Calvert (USA), and also at Vega (Brazil) and VAMA (China). We're determined to extend our market-leading position in developed markets and have invested accordingly to ensure this happens.

Above: inauguration of VAMA in 2014

But from a growth perspective, it's the developing world that presents real potential. China is already the world's largest automotive manufacturing market, producing almost 23 million units in 2014. Yet its future growth potential is immense, with production forecast to rise to over 32 million units by 2020. In other words, China will be larger than the North American and European markets combined. As the world's leading steel supplier to the automotive sector, our company recognises that China is clearly a market we need to be in. That's why we launched a joint venture with Hunan Valin to form VAMA, a state-of-the-art automotive steel production facility that was inaugurated in June 2014.

Another key developing market is Mexico, where production is expected to increase by over 50 per cent between 2014 and 2022, with the additional production not only supplying growing demand in-country, but meeting demand from the US and Canadian markets. We have positioned ourselves to capitalise on this trend through the acquisition of AM/NS Calvert, one of the world's most advanced steel finishing facilities, in South Alabama.

India too is crucial, as one of the fastest-growing automotive markets in the world. Production is expected to double between 2014 and 2020, from 3.6 million units to 7.3 million units. It represents the natural next-step in our global growth plans, which is why we have signed an MoU with The Steel Authority of India Limited (SAIL), for a potential automotive-focused steel joint venture in India. It's early days, and it could take between 18 months and two years for the MoU to become a formal joint venture, but we've certainly signalled our intent.

But expanding our footprint isn't just filling blanks and buying, or building, plants in regions of demand growth. Auto manufacturers are increasingly demanding the same products be delivered to their production facilities on a worldwide basis. So the Ford that you buy in the US, for example, will ultimately be exactly the same design and specification as the Ford you buy in China, or India, or anywhere else in the world. We anticipate the percentage of cars that will be built of these global platforms will increase from around 46 per cent in 2014 to 63 per cent by 2020.

The result: we have to ensure we are not only well-positioned to capture demand growth, but that we can supply exactly what our customers want, wherever they are in the world. And we're doing everything we can to ensure that happens.

By Brian Aranha, head of global automotive and commercial coordination

Image credit: Peugeot.fr

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