Can India Offset the Loss of Chinese Steel Demand?

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Yesterday’s post explained how the Short Range Outlook (SRO) report released by the World Steel Association for 2015-2016 predicted steel demand would grow by just about 0.5% to 1.544 million metric tons in 2015.

Pool 4 Tool’s Automotive SRM Summit

The world’s steel sector looks on with hope to India to see it through this downturn. The country’s per capita consumption was still low, at about 60 kg as against the world average of 220 kg. With the government’s Make In India (manufacturing) plan slowly grinding into motion, it is hoped that this will lead to an increase in steel consumption.

The End of Annual Growth for Chinese Steel

So, the China steel story is over, at least for the short-term. The economic deceleration there, following low investment growth since 2008, is expected to adversely impact any steel growth there, and it has so far this year.

In 2014, for the first time since 1995, Chinese steel demand registered negative growth. Much of it is because of the government’s move to realign its real estate sector, leading to lower demands for steel.

For the next two years, Chinese steel use will continue to record negative growths of -0.5%, according to the WSA. Many steel analysts also do not foresee a recovery in China in the medium term. The low demand is also the reason why Chinese steel mills, having no customers domestically, have started dumping their products in India, the US and other markets at cheaper rates than locally available steel, evoking massive protests in those countries.

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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