Excess Chinese steel is putting pressure on Indian steelmakers

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Excess Chinese steel is putting pressure on Indian steelmakers

Ferrous 23 Jul 2024 11:26 AM IST Live Mint

India’s Economic Survey 2023–24, presented in parliament on Monday, stated that the country’s steel industry has seen severe overcapacity due to China’s property sector’s dismal performance since 2021, which has caused a collapse in the alloy’s global pricing. The report stated that this (Chinese overcapacity and exports) is exerting "significant pressure" on steel producers in India, Vietnam, Brazil, and other nations.

The remarks regarding the steel industry were included in a broader analysis of how China's manufacturing juggernaut is now threatening emerging markets and developing economies (EMDEs). China's manufacturing trade imbalance has been growing since 2019, owing to poor domestic demand and increased industrial capacity, according to the most recent Economic Survey.

This has resulted in Chinese enterprises expanding into international markets, causing global prices to collapse and driving other national producers out of business, particularly in product areas where China dominates, according to the survey. For example, China's exports of steel products have increased by 27% so far in 2024, following a 35% increase in the previous year.

In the meantime, India became a net importer of steel in later quarters of FY24 after beginning as a net exporter in the first quarter. After being a net exporter of the alloy for the previous decade, the country has returned to being a net importer. “This was largely driven by price differentials between international and domestic prices of finished steel. Low prices in the international market led to reduced profit margins for exports and made imports more affordable, affecting the trade balance in steel,” the Economic Survey said.

According to official data released by the Joint Plant Committee, India imported 1.9 million tonnes (MT) of completed steel during the April–June quarter of the current fiscal year, which is 28% higher than it did during the same period last year. India's net imports increased during this period as steel exports fell 36% year over year to 1.3 MT. India appears to have consumed 35 MT of steel during the quarter.

The growing threat of Chinese exports in steel and other industries is prompting many emerging economies to erect new trade barriers, according to the Economic Survey. “These protectionist measures directed against Chinese products are emerging due to the threat that the overcapacity in China's manufacturing sector is posing to other countries, especially in the EMDEs.”

In response to these import limitations, China has begun retaliating. For example, according to the Economic Survey, China has been covertly preventing India from obtaining solar equipment due to India's anti-dumping investigation into Chinese companies. “Developing countries will have to figure out a way of meeting the import competition from China and, at the same time, boosting domestic manufacturing capabilities, sometimes with the collaboration of Chinese investment and technology,” it said.

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Excess Chinese steel is putting pressure on Indian steelmakers

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