China’s Economic Liberalization a Boon for Indian Steel Industry
The Indian steel sector stands to benefit greatly from the reopening of China’s economy, as it presents a wealth of opportunities for Indian manufacturers to step in and supply steel to other nations in place of China. As consumption drives the recovery, Indian steel manufacturers will ramp up production to meet the rising demand. Additionally, declining energy prices, including coal, will further bolster the gains for Indian firms.
India stands to gain from China’s shift towards a consumption-based economy, as the Asian giant will be less focused on infrastructure development and steel production. This presents a significant opportunity for India to step in and take over as the primary supplier of steel to other nations, as well as potential export to China when its production is low. The drop in demand for steel in China will also drive down energy and raw material prices, which will give Indian steel manufacturers a competitive edge.
Vijay Sharma, director of Jindal Stainless, warns that Indian companies should be cautious of Chinese business practices, as China has a history of dumping steel and other products in various countries, including India. Sharma claims that Chinese companies have begun producing stainless steel in Indonesia, where capacity is 25 times greater than consumption, and that with the help of government subsidies, it is difficult for any company to compete. Sharma suggests that the Indian government’s efforts to reduce costs would help the Indian industry become more competitive.
The importation of stainless steel flat products from China and Indonesia experienced a significant increase of 178% in the fiscal year of 2022, totaling 515,051 tonnes. This is in contrast to the 185,132 tonnes imported in the previous fiscal year, as reported by the Ministry of Commerce & Industry. Meanwhile, imports from other countries saw a decline of 8%. According to Hetal Gandhi, Director of Research at Crisil Market Intelligence & Analytics, the liberalization of the Chinese economy is the driving force behind this trend, causing a rise in global prices and a dramatic increase in Chinese steel prices by more than 20% since November.
Impact of Chinese Demand on Steel Production and Imports
According to Gandhi, the rise in Chinese demand for steel is unlikely to result in finished steel exports to China. However, it has caused imports to become more expensive, which could help domestic steel producers increase production. However, this benefit will be short-term and only occur once substances are replaced, which is predicted to happen in the next month. Crude steel production has held steady at around 10.5 million tonnes per month from October to December 2022. Still, it is forecast to increase in January 2023 due to increased demand and falling imports. Additionally, a report by Morgan Stanley suggests that China is experiencing a robust recovery from the Covid-19 pandemic, which began in late December and is expected to continue.
According to a brokerage firm, the economy is expecting to recover after the Covid pandemic and regulatory reset by 2023’s second half, driven by consumption and an improving job market. They predict above-average GDP growth of 5.7% and mild inflation. Additionally, prices for domestic steel expected to increase in the current quarter, with companies already raising prices by up to 3,000 rupees per ton.