Shanghai Baosteel Group Corp, China's largest and most profitable steelmaker, teamed up with Hubei Province-based Dongfeng Motor Corp on Saturday as strategic partners to exploit the country's booming automobile industry.

The two sides will strengthen their cooperation in logistics, steel research and development, sales and service, and e-commerce. However, no investment plans were revealed.

Baoshan Iron and Steel Co Ltd, Baosteel's Shanghai-listed subsidiary, will set up a sales and service center in Wuhan City, home of Dongfeng's headquarters, to offer customized service according to Dongfeng's specifications.

The Wuhan sales and service center will be Baosteel's hub in central China and has plans to extend its business to surrounding areas of Wuhan.

Meanwhile, Baosteel will participate in Dongfeng's research and development work. When Dongfeng plans to launch a new model, Baosteel will help in developing the steel sheets according to the automaker's technological requirements.

The two parties' tie-up is an expansion of their former supplier relationship. Baosteel became Dongfeng's steel supplier more than a decade ago. Baosteel provides about 30 percent of steel sheets used on Dongfeng's autos.

"As a strategic partner, Baosteel can help Dongfeng to cut its production costs and enhance the localization of Dongfeng's auto output," said Xie Qihua, chairwoman and general manager of Baosteel.

Baosteel's participation can also relieve Dongfeng's dependence on imported steel sheets for its high-end cars.

Dongfeng produced 410,000 vehicles and its sales topped more than 70 billion yuan (US$8.43 billion) in 2002. It is expected that Dongfeng will produce 500,000 autos and achieve sales of more than 80 billion yuan this year.

"China's auto industry is witnessing soaring growth," said Xie. "It gives automaker and steelmaker alike a platform to strengthen their cooperation and increase their respective competitiveness."

"Dongfeng and Baosteel's alliance is conducive to both sides," said Miao Wei, general manager of Dongfeng. "It will help both parties from upstream and downstream to benefit from the country's booming auto industry."

Last year, China produced 3.25 million autos. The figure is expected to hit 4 million this year.

The steelmaker has already formed similar alliances with two other automakers - Shanghai Automotive Industry Corp and Shenyang-based First Automobile Works Group this year.

(Shanghai Daily November 10, 2003)