SHANGHAI–China’s goal to become a consumption-driven economy will lead to sustained demand growth for the global stainless steel market, said a top executive from the world’s largest stainless steel producer, Outokumpu Oyi (OUT1V.HE).
Despite analysts being divided over how long China’s economic rebound may last, “China is a growth engine for us and will become a profitable market in the future,” said Austin Lu, president of Asia Pacific.
Although Europe is currently the company’s main market, China promises to be an important source of revenue in the coming years, as a result of government-planned reforms aimed at shifting from an export-dependant economic growth model to one driven by private consumption.
China currently accounts for half of Outokumpu’s business in the Asia-Pacific region, according to Mr. Lu. A growing urban population and an environmentally friendly society would mean more demand for sophisticated raw materials such as stainless steel, said Mr. Lu, estimating annual demand growth of 5%-6% from China until 2020.
Recent data showed resilient growth in China’s economy, offering the central government the freedom to focus on structural reforms such as financial liberalization, measures to promote labor mobility and a push for green energy.
China consumes 60% of global stainless steel supply. Stainless steel has widespread applications, ranging from silverware to high-rise edifices.
Global commodity prices have remained under pressure since the beginning of the year, as investors are concerned that a slowdown in China, the world’s largest consumer for most commodities, would bring an end to elevated prices that have generated high returns over the past decade.
Outokumpu will focus on construction of skyscrapers and landmark projects in China in the coming years, given its global expertise in the area, while partnerships with Chinese state-owned companies in the energy sector are also likely to rise in the next two to three years, according to Mr. Lu.
In June, the company signed a strategic partnership agreement with Sinopec Group to supply stainless steel for use in piping to Sinopec subsidiary China Petrochemical International Co.
“Sinopec has a lot of liquefied natural gas projects, and those are what we’re looking to be involved in,” Mr. Lu said.
Mr. Lu also said his company hopes to eventually set up a fourth global research and development center in Shanghai. The company has R&D centers in Germany, Sweden and Finland.
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