ArcelorMittal, the world's top steelmaker, said it would use its Chinese joint venture to tap into the country's fast-growing car market, helping offset slackening steel demand on the back of a slowing economy.

The company's joint venture with China's Hunan Valin Steel Company starts operation this month, with an annual production capacity of 1.5 million tonnes, including hot and cold-rolled coils, and parts such as chassis and wheels.

"Demand for vehicles in China will continue to grow. Today, China produces about 20 million cars per year ... so there is demand for these kind of niche products, like the ultra light-weight auto steel," Mittal said in an interview in central Hunan province.

China became the world's biggest car market five years ago, with annual sales growing nearly 14 per cent last year to smash through the 20m mark, thanks to a burgeoning middle-class that is eager to spend.

ArcelorMittal said it has no further short-term expansion plans in Asia or elsewhere, despite steel demand gradually recovering in the US and Europe.

Although China's steel sector, the world's largest in terms of capacity and consumption, is already plagued by gross over capacity, there is still a shortage of high-end automotive steel.

Imports from Japan and South Korea hover between 1.5 million to 2 million tonnes per year. ArcelorMittal previously supplied steel produced outside of the country to automotive manufacturers in China.

Mittal said the Hunan venture would supply steel to international car makers and domestic players such as Geely Automotive Holdings, Dongfeng Motor Group and Shanghai Auto.

China's huge automotive steel market is critically important to foreign companies, which have looked to its rapid growth to compensate for flagging sales in Europe.

Despite a buoyant outlook for China's auto steel demand, some analysts have said that any stronger-than-expected growth for electric vehicles, which use more aluminium for car bodies, could take some shine out of steel consumption.

China had set a target of selling more than five million electric cars by 2020, which would account for about one-seventh of all vehicle sales in the country if realised.-Reuters