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Economic Observer reporter Pu Zhenyu China's largest steel company and Japan's largest steel company are about to end their joint venture relationship in the automotive sheet business that has lasted for nearly 20 years.

On July 23, Baoshan Iron & Steel Co., Ltd. (hereinafter referred to as "Baosteel") announced that the board of directors passed the "Proposal on Acquiring 50% Equity of Baosteel Nippon Steel Automotive Plate Co., Ltd. (hereinafter referred to as "BNA")". The proposal shows that after the two parties agreed, Baosteel will acquire 50% equity of BNA held by Nippon Steel for RMB 1.758 billion. After the completion of this acquisition, BNA will continue to exist as a wholly-owned subsidiary of Baosteel.

According to information, BNA specializes in the production and sales of high-grade automotive steel plates. Baosteel Group and Nippon Steel Corporation each hold a 50% stake in the company. The company's operating period will expire on August 29 this year.

Nikkei Asia reported that due to the rise of Chinese electric car manufacturers, Japanese automakers, the main customers of Nippon Steel, are in trouble in the Chinese market. Against this background, Nippon Steel believes that it will be difficult to expand its business in China, so it plans to focus its investment resources on the United States and India.

Data from the China Passenger Car Association shows that the market share of Japanese cars in China has continued to shrink in the past few years. From 2021 to 2023, the market share of Japanese cars was 22.6%, 20% and 17% respectively. In the first half of this year, the share of Japanese cars further dropped to 14.9%.

Baosteel Group is the core enterprise of China Baowu Steel Group. According to the "World Steel Statistics 2024" released by the World Steel Association, in 2023, China Baowu Steel Group will continue to rank first in the world with an output of 130 million tons. Nippon Steel Corporation, as Japan's largest steel company, ranks fourth in the world with an output of 43.66 million tons.

Over the past few decades, Baosteel and Nippon Steel have been both enemies and friends. According to data, during the preparation and establishment of Baosteel, it introduced complete sets of equipment, technology and modern management systems from Nippon Steel, the predecessor of Nippon Steel. At the same time, more than a thousand Baosteel technicians and operators went to Japan for training and internships, and Nippon Steel also sent a large number of technical experts to participate in and guide the construction of Baosteel.

In the early 20th century, with thea ToyotaJapanese joint ventures such as Toyota and GAC Toyota were established in China one after another. Nippon Steel, a supplier to Toyota, also began to build production capacity in China and reached cooperation with Baosteel. In 2004, Baosteel, Nippon Steel and Luxembourg steel giant ArcelorMittal jointly established BNA, with the three parties holding 50%, 38% and 12% of the shares respectively. In 2011, ArcelorMittal and Nippon Steel agreed on an equity transfer agreement to transfer their 12% shares to the latter for a fee.

According to information, BNA has been responsible for processing steel plates imported from Japan and supplying them to Japanese automakers' Chinese factories. In this process, Nippon Steel has expanded its business in China and Baosteel has improved its steel production technology, and both parties have benefited.

However, in recent years, the competition between Nippon Steel and Baosteel has become increasingly fierce. In July 2020, Toyota Motor began to partially use Baosteel's products in its hybrid and pure electric vehicles sold in Japan. It is understood that this is the first time that a large Japanese automaker has used non-oriented silicon steel produced by a Chinese company in passenger cars produced in Japan.

At that time, Toyota Motor said that the quality of the products provided by Baosteel was not inferior to those produced in Japan. In the context of the gradual popularization of electric vehicles, Toyota Motor will promote the diversification of its suppliers.

However, Baosteel's winning of the Toyota Motor order sparked dissatisfaction from Nippon Steel. In 2021, Nippon Steel announced that it had sued Baosteel and Toyota Motor in the Tokyo District Court of Japan, demanding damages from both companies, because Baosteel violated Nippon Steel's patents related to electromagnetic steel sheets and produced electromagnetic steel sheets for Toyota Motor for electric vehicle manufacturing.

It is understood that non-oriented silicon steel, as an irreplaceable core material for new energy vehicle drive motors, is one of the most competitive directions for steel companies in the new energy vehicle market. In November 2023, Baosteel said that more than half of the domestic new energy vehicle drive motors use Baosteel's non-oriented silicon steel.

It is worth noting that in November 2023, Nippon Steel Corporation announced that it had ended the patent infringement lawsuit against Toyota Motor by "giving up claims", but its litigation with Baosteel Group is still ongoing.