It is tough to find a bright spot in the global steel sector, as prices plunge and struggling Chinese producers flood world markets with their surplus stock. But if pressed, gloomy industry-watchers see at least some reason for optimism in Asia’s second-largest emerging market, India.
“There is really only one location that has the long-term potential to pull the global steel market out of its current slump, and that is India,” says Edwin Basson, director-general of the World Steel Association, a trade group. “But, and this is the big question, while India has huge unfilled demand and a big economy, when will all this be felt?”
India is already the world’s fourth-largest steel producer and is expected to overtake the US for third place in the next year or two. And while its steel consumption is barely a tenth that of the world’s largest user, China, it is at least expanding. Growth will be 8 per cent next year, according to Fitch, the rating agency.
India is adding capacity too, led by its big three producers: Tata Steel, JSW Steel, and state-backed Steel Authority of India. Last month, Tata Steel inaugurated a huge new plant in the eastern state of Orissa, which eventually will nearly double its output.
Tata Steel in many way exemplifies India’s unusual place in world steel markets. The company’s lossmaking European arm has been hammered by cheap imports and flat demand over recent years. It is now moving toward selling off part of its ailing UK division, having announced 1,200 job losses in October. The group’s Indian arm is much smaller, producing just a third of its output, but performs far better, last year contributing 80 per cent of group underlying profits.
Nevertheless, India’s steel producers are downbeat for two main reasons, the first being China. In common with their global counterparts, most have been hit badly as Chinese competitors send excess capacity abroad. Indian steel imports soared 72 per cent in the financial year to March 2015, and have risen further still this year.
Steelmakers are livid. Chinese exports have “caused havoc”, says billionaire tycoon Sajjan Jindal of JSW, India’s second-largest private sector steelmaker by revenue. Domestic steel appetite might be growing, he says, but local production is stagnant because imports mop up any increases in demand.
India’s government responded in August by increasing taxes and import duties on a range of steel products, curbing inflows somewhat. But Mr Jindal and his fellow industrialists have been pushing for more, and this month policymakers in New Delhi introduced a series of further minor anti-dumping duties.
Source : http://www.ft.com/