Nikkei recently reported that Toyota Motor will procure some of its electrical steel sheet from China Baowu Steel Group, in a move that could presage an era in which Japanese steel-makers will have to compete on price as well as quality. Toyota has not only approved the quality of China Baowu's steel sheet for use in hybrid and electric vehicles made in Japan, it is already taking delivery of the product. China Baowu will supply a limited amount of the steel to Toyota, but a Toyota executive said the Chinese product is as good as its Japanese-made counterparts and we're going to diversify the material's suppliers, as use of electric vehicles is expected to grow."

Steel sheet is a high-performance product and a crucial electric vehicle material, the production of which requires sophisticated technology. Because high quality is critical, Toyota has mainly sourced it from Japan's leading steel-makers.

Electrical steel sheet is magnetized through a special process. Its production requires sophisticated technologies, such as to remove impurities. The product goes into core components of electric vehicles, including motors.

The deal is seen as sign Chinese steel-makers, reliable suppliers of large quantities of general-purpose products, are catching up with Japanese rivals in terms of quality.