Search the Internet          Tips  Sites: Finance, Investment

Chinese production gap Big Hope for local steel firms

V Phani Kumar

China could come to the rescue of the foundering domestic steel industry in the wake of curbs imposed by the US and the European Union.

Chinese steel requirement is expected to soar to 180 million tonne by the year-end, while production may increase to only 160 million tonne, according to sector analysts.

Analysts said if domestic companies can export around 2-2.5 million tonne to China, it will stabilise the domestic prices.

But penetrating the Chinese market will not be easy, senior industry sources said, as currently the Indian presence there is only through dealers.

On the other hand, Japanese, Korean and the Commonwealth of Independent States already have a physical presence there, and are known to have dumped steel in most of the major markets.

China, already the largest producer and consumer of steel, is getting into a position where it can drive global steel prices in the future, industry sources added.

Jatinder Mehra, managing director, Essar Steel, said, "Any deficit in supply would raise international prices. Exporting to China would act as a balancing factor and ease pressure on the domestic market by reducing the surplus."

Sources at Ispat Industries said China could be a very large customer for India's directly reduced iron, pig iron, hot-rolled coils and cold-rolled sheets, galvanised sheets and iron ore.

"However, India would stand a better chance if the domestic companies come together and approach the Chinese market as a consortium."

The Chinese steel industry, which is six times the size of its Indian counterpart, is growing at seven times the pace of the local steel sector.

And in January-March 2002, production of steel in China grew 26 per cent to 41.26 million tonne, as per International Iron & Steel Institute data.

In contrast, the Indian industry grew by just 3.8 per cent to 7.13 million tonne from 6.87 million tonne in January-March 2001.

In the year 2000, steel production in China was 127.2 million tonne, 10 per cent short of demand.

Powered by

ALSO READ:
The Rediff Budget Special
The Rediff-Business Standard Special
Money

Tell us what you think of this report