By Nantoo Banerjee
It may look rather odd that the steel production in India, the world’s most populous country, reached only 140 million tons as against China’s output of 1.019 billion tons, last year. The main reason is that India’s housing and construction sector is not showing the robust growth which it badly needs. Such a growth will automatically push up the country’s steel and cement consumption. The infrastructure sector – both urban and rural — continues to be in a poor state.
Supporting China’s massive production of steel is the country’s internal consumption, which has been very large compared to any other country in the world although it has been declining since 2022. In 2021, China’s steel consumption reached 993.8 million tons, in 2022 – 961.5 million tons, and in 2023 – 935.5 million tons. Last year, India’s domestic steel consumption was only around 136 million tons despite a 13 percent increase over the previous year’s estimate. India’s steel consumption is growing but not big and fast enough, mainly because of the slow growth of its housing, rural development and infrastructure sectors.
The country’s steel consumption trend indicates that only five of its states are showing good growth while 23 other states and eight Union territories have remained laggards. Maharashtra, Uttar Pradesh, Gujarat, Karnataka, and Tamil Nadu accounted for 41 percent of the country’s total steel consumption in 2022-23. The credit rating agency ICRA has forecast that domestic steel consumption will grow by nine to 10 percent during the current financial year. Although on paper India is the world’s second largest steel producer and consumer, it means nothing in terms of the state of the country’s generally poor living condition and its social and physical infrastructure. As a result, the country’s per capita steel consumption remains among the lowest in the world.
Incidentally, a country’s steel consumption is often linked with its cement consumption. India’s cement consumption, though moving upward, is still very low. Last year, the country’s cement market size reached 396.7 million tons. The production reached 374.55 million tons, a 6.83 percent increase year-on-year. In the five months from November 2023 to March 2024, cement prices in India fell by Rs.40–45 per bag. By 2030, cement demand is projected to double to 660 million metric tons. India has a long way to go to substantially improve its rural housing and infrastructure to become a big consumer of steel and cement.
Compare this with China’s cement output which was 2.02 billion tons last year despite a five percent decline from the previous year’s level. According to the China Cement Association (CCA), the capacity utilization rate for 2023 was only 59 percent. In April 2024, Reuters reported that the capacity utilization rate had dropped to 50 percent due to declining performance of the real estate sector. In 2023, the Chinese cement sector’s profit dropped by 50 percent to US$4.42 billion, the lowest level in 16 years. As in the steel sector, the Chinese cement industry is faced with intensified market competition and rising fuel and material costs. The industry is required to make large investments for environmental protection and energy consumption.
Unfortunately, the government of India is not spending enough on rural housing and infrastructure to bolster the country’s economic growth. In addition, the country is facing a constant dumping threat from China with India’s commerce and steel ministries doing little to mitigate the situation. Faced with the slow-down in China’s construction industry and the tightening of anti-dumping measures in the US and EU countries against steel and other products from China, the latter seems to have shifted its export focus on India.
Ironically, India’s steel makers too are pushing for exports for their growth and survival. China’s massive Belt and Road Initiative (BRI), covering some 51 countries with a combined GDP of $41 trillion and population of 5.1 billion, has lately slowed down under debt burden of the beneficiary nations leading to contraction of its steel and other construction materials exports. This may have made India a preferred destination for Chinese exports.
In April, this year, the value of Chinese steel exports to India was $434.01 million, up from $391.67 million in March. China’s steel exports to India have been increasing, and India became a net importer of steel in 2023–24. This has led to concerns among Indian steel manufacturers, who are demanding action to curb imports and protect their industry. However, such measures will only temporarily help the industry. The real help from the government would come if it doubles up expenditure on rural housing and infrastructure the way China did in the last 20 years.
Despite India being the second largest steel producer in the world, not one Indian company features in the list of the world’s top 10 steelmakers. Although Tata Steel is the world’s 10th largest steelmaker, its production sites are located in several countries, including India, the UK, the Netherlands, Thailand and Canada. Its Jamshedpur plant has an annual capacity of 10 million tons per annum as against the company’s global crude steel output of 20.8 million tons in 2023-24.
Seven of the world’s top 10 steelmakers are located in China. The China Baowu Group is the world’s largest steelmaker with an annual capacity of around 135 million tonnes – nearly the same as India’s total consumption last year. Naturally, Baowu dominates China’s steel market, especially in auto sheet and electrical steel. Others include ArcelorMittal, the second largest and a truly multinational steel company spread across the world with establishments in Algeria, Argentina, Australia, Austria, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, Chile, China, Colombia and Costa Rica. ArcelorMittal has primary steelmaking facilities in 16 countries, with an industrial presence in 59. Other top steel companies are: Ansteel Group, China, Nippon Steel of Japan, Shagang Group and HBIS Group, both China-based, POSCO Holdings of South Korea, Jianlong Group and Shougang Group, both from China.
Compared to those giant global steel producers, leading Indian steelmakers, outside Tata Steel, such as Vedanta, JSW Steel, Steel Authority (SAIL), Jindal Steel and Power, Bhushan Steel (now Tata Steel BSL), Elegant Steel, MS Agarwal Foundries, Jindal Stainless and Tata Sponge Iron (now Tata Steel Long Products) would appear to be pygmies. While state-owned enterprises led China’s massive steelmaking capacity, India neglected its public sector Steel Authority having integrated plants in Bhilai, Rourkela, Durgapur, Bokaro and Burnpur. In addition, SAIL has special steel plants at Salem, Durgapur and Bhadravathi. For reasons best known to the government, SAIL, once the country’s largest steelmaker, has been treated shabbily over the years. (IPA
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