India is becoming the 'savior' of the world steel industry

India is expected to overtake China as the world's most populous country by 2023. The South Asian country's construction sector is therefore in a boom period,  Bloomberg  reported.

Prime Minister Narendra Modi is looking to modernize roads, railways and ports to compete with China, aiming to become a major global manufacturing hub.

According to the World Steel Association, India's steel demand will grow 6.7% to around 120 million tons next year. This will be the strongest growth among major economies.

A few years ago, India overtook the US to become the second largest steel consumer globally, second only to China.

Sharing with  Bloomberg, Mr. Jayant Acharya - Deputy Managing Director at JSW Steel, India's largest steel producer - said: “The national construction phase of any major economy requires a lot of steel. and goods”.

He said India is going through that phase in the current decade. The country's steel demand could soar to more than 200 million tons by 2030.

The bright prospect of the steel industry in India has prompted steel enterprises to increase capacity.

ArcelorMittal Nippon Steel India, a joint venture between India's Mittal Group and Japan's Nippon Steel, plans to triple its capacity to 30 million tonnes over the next decade.

South Korean steelmaker Posco Holdings and tycoon Gautam Adani - the richest man in India as well as Asia - are also looking to build new plants in the populous nation.

India currently produces most of the steel it uses. However, they are also having to import more to meet the growing demand.

According to government data, compared with the same period last year, India's steel imports in the period from April to October this year increased 15% to 3.1 million tons.

Local companies are becoming worried about the large amount of cheap imported steel flooding the market.

China now accounts for more than a quarter of India's steel imports in October. In addition, some Russian steel has also made its way to India, government data shows.

Mr. A. K. Hazra, Deputy General Secretary of the Indian Steel Association, asked the authorities to look into the matter, because the quality of some steel batches "did not meet the standards".

"We want the imported steel to be competitively priced, and the quality must comply with Indian standards," Hazra said.

Despite strong demand growth, India is still far behind China in terms of total steel consumption. According to World Steel Association data, India's demand next year will be less than one-seventh of China's 914 million tonnes.

Whether India can close the gap with the world's second largest economy depends on the success of the construction investment packages that Prime Minister Modi has deployed.

The Indian Ministry of Finance estimates that to complete the National Infrastructure System project, the country will need a budget of about $1.4 trillion between now and 2025.

Jayanta Roy, Senior Vice President of ICRA (India branch of Moody's), said that the real estate shock and prolonged impact of the pandemic will put a hold on China's steel demand next year.

“In the long run, on the one hand, China's steel demand will depend on the resilience of the real estate sector. On the other hand, this will depend on China's infrastructure-driven growth model," predicts Roy.

Bloonberg