The next steel powerhouse: China or India?

Global steel 2013

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China restructuring

China remains the largest market in the steel sector, even though in 2012 it experienced:

  • Lower steel demand
  • Overcapacity
  • A fragmented industry
  • Weak profit margins

Although China is the dominant market, India is increasing its presence in the global steel sector.

The Chinese government aims to address these challenges through its 12th Five-Year Plan (FYP). It represents China’s goal to rebalance its economy and shift the focus from investment toward consumption and move development from urban areas to rural areas.1

In terms of the steel sector, the 12th FYP focuses on promoting the use of modern technology, energy efficiency and improved product quality.

Successful execution of the 12th FYP policies will not only help contribute to the domestic and global steel demand, but also promote the production of value-added steel.

Is India on track to becoming the next steel powerhouse?

Although China is the dominant market in the steel sector, India is increasing its presence in the global steel market, as a result of domestic steel consumption. The rising middle class population coupled with increased urbanization will grow steel intensity in the economy.

India has seen a rapid rise in production over the past few years, becoming the fourth largest producer of crude steel and the largest producer of sponge iron in the world.

There are many opportunities that are helping grow the Indian steel market:

  • Rural demand picking up
  • Investment planned in road sector
  • Indian railway expansion
  • Automobile and power sectors offer opportunity for specialized steel
  • Refocus on manufacturing

However, there are also some challenges that India must overcome:

  • Land acquisition and environment regulations
  • Shortage of coking coal
  • Availability and pricing of domestic iron ore
  • Downstream value addition
  • Insufficient infrastructure and logistics
  • Overburdened port facilities
  • Adoption of modern technology
1“China’s rebalancing push needs tailor-made policy,” Shanghai Daily, 20 December 2012, Factiva, http://global.factiva.com/ha/default.aspx.

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