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Steel News January 30, 2023 12:15:28 PM

China Opening Up Economy to Aid India Steel Firms

Paul Ploumis
ScrapMonster Author
China has moved on from Covid, and an early and strong recovery is expected, which already began in late December.

China Opening Up Economy to Aid India Steel Firms

SEATTLE (Scrap Monster): The reopening of China’s economy, which accounts for almost a fifth of the world’s GDP, would also open up a plethora of opportunities for the Indian steel sector. With the recovery expected to be supported by consumption, Indian steel manufacturers would be able to replace China in providing the product to other nations.9/

While China would also become a market, Indian manufacturers would also scale up production to meet increasing demand. Further, a fall in energy prices — including coal — would also add to Indian firms’ gains.

“China would be looking at consumption-led recovery rather than investment-led growth, which indicates that large investments would not be made in infrastructure development. It would look at increasing domestic consumption, and in a consumption-led economy, the demand for the commodity is not as high as that in the past cycles,” JSW Steel joint MD and group CFO Seshagiri Rao MVS said. “This would be an opportunity for India as China won’t produce more steel, and we would be able to replace them in supplying steel to other countries. We will also be able to export to China when production in that country is lower. A fall in demand would also lead to a fall in production, which will result in a decline in energy, including coal, and raw material prices. That will be also good for Indian steel manufacturers,” Rao added.

However, Vijay Sharma, director at Jindal Stainless, is cautious. “Indian firms should be wary of the Chinese way of doing business. When it comes to manufacturing of steel and stainless steel, and other products, China has much more capacity than its requirements and it has a precedent of dumping products across the US, EU, Japan and other nations, including India. Most of the countries have imposed anti-dumping or anti-subsidy duties on China,” Sharma said.

“Chinese companies have started producing stainless steel in Indonesia where the capacity is at least 25 times more than its consumption. This has resulted in the majority of the produce being exported. With subsidies of about 20-30% by the Indonesian and Chinese governments, it is extremely difficult for any company to compete with them,” he said, adding that the Indian government’s various initiatives to reduce cost of capital and logistics would help Indian industry to become competitive.

In FY22, combined imports of stainless steel flat products from China and Indonesia rose to 515,051 tonne, a 178% rise from 185,132 tonne in FY21. On the other hand, imports from the rest of the world shrank by 8%, according to ministry of commerce & industry data.

According to Hetal Gandhi, director-research at Crisil Market Intelligence & Analytics, the opening up of the Chinese economy has led to a rise in global prices and a sharp rise in Chinese steel prices by over 20% from November lows.

“While a rise in Chinese demand is unlikely to lead to finished steel exports to China, it has led to imports becoming dearer again, which would help domestic players scale up production. However, the benefit would only be limited to imports’ replacement in the near term. This is not likely to happen until February,” Gandhi said, adding crude steel production has been at about 10.5 million tonne (mt) a month, largely similar from October to December 2022. “This is expected to rise from January 2023 onward in line with higher demand and falling imports.”

China has moved on from Covid, and an early and strong recovery is expected, which already began in late December. While a few one-off factors were at play, the pace of recovery has been quite robust, according to a report by Morgan Stanley.

“We expect the economy largely to move to a new trend growth after Covid and the regulatory reset by second half of 2023, mainly supported by consumption amid excess savings, improving household balance sheets (after hiccups in 2022), and recovery in the job market and income expectations,” the brokerage firm said, adding, “We project above consensus GDP growth of 5.7% but see mild reflation.”

Prices in the domestic market, after bottoming out, are set to rise in the current quarter, with firms alre-ady hiking prices by Rs 2,000-3,000 per tonne in both flat and long steel.

Courtesy: www.hellenicshippingnews.com

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