India's political defect offers great opportunity for China's steel industry

Jan. 14, 2015

India’s demand for steel increased 1.8% in 2013, and the International Iron and Steel Association expected the figure to grow 3.4% to 76.2 mn tonnes in 2014 and further escalate 6% in 2015.

As India is in significant shortage of infrastructure and basic industries, it has to rely on steel imports for years to compensate for domestic insufficiency. As a result, India’s annual imports of steel products, such as special steel, silicon steel and railway steel, totaled over ten million tonnes over recent years.  

Increasing demand for steel products should offer great opportunities for India to develop its steel industry, but the country’s steel sector has failed to expand due to its political defect.

Statistics show that the capacity utilization rate of India’s steel industry reads only 80% for shortage of raw material. However, India should have been free from worries of raw material insufficiency because its iron ore exports was once only second to that of Australia and Brazil several years ago for it boasts large amount of raw material resources. India’s Supreme Court has prohibited mining and iron ore exports in many regions since 2010 in the name of combating illegal mining and cracking down on corruption, which put an end to the golden age of India’s iron ore industry. Consequently, the country’s iron ore production and exports have steeply declined over recent years, and having confronted such a heavy blow, almost all domestic steel makers have to cut steel production as iron ore price continues to spiral up within the country.

Some major steel makers have suffered more severe impact. JSW Steel Ltd, India’s third largest steel producer, saw its output in Karnataka dived over 70% in 2011 with a capacity utilization rate of less than 80%. Likewise, almost all of the country’s major steel companies have to halt or cancel investment and expansion projects.

In addition, many major steel projects have been hindered for a long time or even messed up. For instance, POSOCO once signed a MOU with Indian government to build a 12 mn-tonne steel plant in Orissa with a total investment of 12 bn USD. However, in the long run of eight years, land acquisition in Orissa was constantly impeded by various political reasons, and POSOCO had finally to call off this project.

For now, China’s steel output accounts for a half of the world’s total, and the steel exports exceeded 90 mn tonnes in 2014. India’s rising demand for overseas steel products provides a good opportunity for China’s steel makers.

-Edited by www.Mysteel.net