Modi’s building boom setting up India as global steel saviour
Sign up now: Get insights on Asia's fast-moving developments
Poised to overtake China as the world’s most populous country in 2023, India is in the midst of a building boom.
PHOTO: REUTERS
NEW DELHI - With China’s massive construction sector still in a funk and the United States and Europe likely heading into recessions, India has emerged as a saviour for flagging global steel demand.
Poised to overtake China as the world’s most populous country in 2023, India is in the midst of a building boom. Prime Minister Narendra Modi is seeking to modernise roads, rail networks and ports in an attempt to vie with China as a manufacturing hub.
That is set to translate into a 6.7 per cent jump in steel demand to around 120 million tonnes in 2023, according to the World Steel Association, the highest growth among major economies. India, which also saw a similar expansion in 2022, overtook the US to become the world’s No. 2 steel consumer after China a couple of years ago.
“The nation-building phase of any economy requires a lot of steel and commodities,” said Mr Jayant Acharya, deputy managing director at JSW Steel, the nation’s biggest producer. India is going through that phase in this decade, and it could boost the country’s steel consumption to over 200 million tonnes by 2030, he said.
The buoyant outlook has set off a flurry of activity.
ArcelorMittal Nippon Steel India, a joint venture between India’s Mittal family and the Japanese producer, has plans to more than treble capacity to 30 million tonnes in the coming decade.
South Korean steelmaker Posco Holdings and Indian tycoon Gautam Adani, Asia’s richest person, are also exploring setting up mills in the country.
India produces the vast majority of the steel it uses, but it is also being forced to import more to meet the surge in demand. Inward shipments rose 15 per cent in April through October from a year earlier to 3.1 million tonnes, according to government figures.
Local producers are becoming worried about the flood of cheap imports as demand dries up in traditional steel producers. China accounted for more than a quarter of imports in October, while some Russian steel is also reaching India, the government data shows.
The quality of some of the steel coming in is “substandard”, said Mr A.K. Hazra, deputy secretary-general at the Indian Steel Association, which has requested that the authorities look into the matter. “We are just asking that imports should be at competitive and international prices, and the quality should adhere to Indian standards.”
Despite the strong growth, India is still well behind its rival Asian powerhouse in terms of total steel consumption. Demand for 2023 will be less than a seventh of China’s 914 million tonnes, according to the World Steel Association data.
How fast India can narrow the gap will depend on the success of Mr Modi’s construction roll-out, with the Ministry of Finance estimating US$1.4 trillion (S$1.88 trillion) of funding will be needed for the National Infrastructure Pipeline till 2025.
China’s real-estate problems and the lingering impact of Covid-19
“Over the long term, it would depend on the recovery of the property sector on the one hand, and the government’s policy of an infrastructure-led economic growth model in China.” BLOOMBERG
