Nantoo Banerjee
China, the world’s largest steelmaker with annual crude steel output of over one billion tonnes, is out to dampen India’s bid to double its production capacity from the present level of 150 million tonnes to 300 mt by 2030 by continuously dumping its ferrous metals on India. China is exporting steel to India like never before as its own home demand wilts. With its domestic steel demand falling in the wake of shrinking construction activities and economic slowdown, China is pushing exports to keep its blast furnaces fully charged. Price discounts and weakening Yuan are helping China to achieve its objectives. Since January, Yuan has depreciated around five percent against US$. Apart from India, China is also banking on its OBOR (One Belt One Road) partners and Chinese project aid receivers in Asia and Africa to offload surplus steel.
India has chalked out a mega plan to raise its steel output to meet the growing demand from the housing, construction and infrastructure activities and automobile industry. Its economy is expected to expand above six percent annually for the next several years. Although India is the world’s second largest steel producer (128 million tonnes, last year), its steelmaking capacity and output are far below the level of China’s. India will require massive production of steel, non-ferrous metals, coal and power to meet its future economic growth targets. India’s per capita steel consumption is only around 77 kgs against the world average of 233 kgs.
In the last 10 years, India’s per capita steel consumption went up substantially. With China’s own steel consumption bound to decelerate in the coming years as it was witnessed in the world’s former top three steel producing countries such as the US, Japan and Russia, the People’s Republic is trying its best to jack up exports to cover the domestic consumption gap to run its steel mills and retain jobs. China is also reorganising its steel industry through mergers and amalgamations. This year, China’s steel exports are expected to easily surpass its last year’s shipment of 67.32 million tonnes to 77 million tonnes.
Unfortunately, India lacks a sound strategy to protect and grow its steel industry against a programmed Chinese export onslaught. Unlike in China, the steel industry in India is deregulated. The government is supposed to act only as a facilitator for fostering the country’s steel consumption. In 2017, the government unveiled a national steel policy (NSP) based on raising the per capita steel consumption upto 160 kgs by 2030-31. The government’s push for infrastructure development through Gati-Shakti Master Plan, ‘Make-in-India’ initiative for the manufacturing sector, Pradhan Mantri Awas Yojna, etc. are supposed to provide impetus to the country’s demand and consumption of steel. The success of NSP will largely depend on factors such as controlling the costs of inputs such as iron ore, manganese, chromium, nickel, coal, electricity and that of transportation.
The Steel Ministry has a joint working group with the Ministry of Housing & Urban Affairs having members from the Bureau of Indian Standards, Central Public Works Department, technical institutions such as IITs and NITs and industries for fostering steel usage in the housing and construction sector. The government has accepted over 50 applications from some 26 companies for production of speciality steel under the production-linked incentive (PLI) scheme. The PLI is expected to help extend annual speciality steel production capacity by 26 million tonnes and generate investment of Rs 30,000 crore. The government has also announced a huge capex of Rs 10-lakh crore for infrastructure development which has opened tremendous investment opportunities across the sectors. During the first two months of the current fiscal, the country’s finished steel consumption was up eight percent at 20.3 million tonnes, the highest in the last six years, while the crude steel production for the period was 22.4 million tonnes, up six percent from a year earlier.
The Chinese steel dumping blitz may partly unsettle the country’s steel production targets. For instance in June, last year, China constituted 26.1 percent of India’s steel imports. The figure went up to 37.1 percent during June, this year. The country’s finished steel imports from China touched a six-year high in the first two months of the current fiscal. China emerged as the second-largest steel exporter to India, selling 0.2 million tonnes of the alloy, up 62 percent from the same period, last year. China-made electrical steels used in power infrastructure and electric motors are flooding the market. India imported 0.9 million tonnes of finished steel in April and May, last. Few countries can match the steel prices offered by China in the global market. Chinese steel exports are believed to be carrying discounts between US$30 and $50 per tonne. This could also be one of the reasons behind a massive drop of India’s own steel exports.
Surprisingly, India is yet to slap countervailing duty (CVD) on import of subsidised Chinese steel. CVDs are trade import duties imposed under World Trade Organisation (WTO) rules to neutralise negative effects of subsidies. Competitive price pressures from China have resulted in the drop of India’s steel export volumes across key markets. India’s steel exports were badly down 50.2 percent year-on-year at 6.72 million tonnes during 2022-23. The country’s finished steel exports saw an over six percent drop in the first quarter of the current fiscal to 2.05 million tonnes. According to the Steel Ministry’s provisional data, exports dropped 28 percent in June to 0.5 million tonnes, as against 0.7 million tonnes of steel shipments in May. During April-May, this year, India exported 1.6 million tonnes of finished steel, mostly to European countries.
India may not reach China’s current steel production levels in the near future even if the country’s economy grows annually over six percent. While the industry’s growth will primarily depend on the input costs and the domestic demand, it will simultaneously require government protection against dumping of products, especially from China, by far the world’s largest steel producer and exporter. China accounts for well over 50 percent of the global steel output. In 2020, China’s share was 56.6 percent of world production. Last year, its share was 54 percent.
Among the world’s other major steelmakers are: the US, Japan, Russia, South Korea, Turkey, Germany and Brazil. All of them produce less than 100 million tonnes per annum. The third ranked US produced 94.7 million tonnes of raw steel in 2022. Japan’s production was 89.23 mt, Russia’s 71.5 mt and Brazil’s 37 mt. Thus, China can sustain its current level of steel production only through dumping exports. China’s steel export, last year, was higher than the entire production of the world’s fifth largest steel maker, Russia. The success of India’s current steel policy rests substantially on how the country protects its growing steel industry from export dumping from China. (IPA Service)
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