China is a world leader in the strategic steel sector, which is bad news for almost everyone. However, there is a piece of good news too. Xi is all set to give away China’s near-monopoly in the steel sector and unwittingly allow India to become the world’s largest steel powerhouse. Xi’s trade war with Australia is ensuring that India replaces China as the biggest steel manufacturer in the world. China’s steel mills are presently well-placed with a production of over 1000 million tonnes of steel last year. However, everything has changed after the outbreak of the Coronavirus Pandemic and the rift in the Sino-Australia relationship.
Now, China is dealing with a perpetual coal shortage. It is one of the main reasons why China is also dealing with an intense power crisis. Coal is an essential commodity required for the production of steel. Electricity is also needed to manufacture steel. As luck would have it, China has neither of the two. On the other hand, India has both. To top it all, the Modi government is also incentivising steel manufacturing in the country with a big bang steel production-linked incentive (PLI) scheme. So, India is all set to emerge as the global steel hub very soon.
India’s Steel Sector to Grow at China’s Expense:
Tata Steel’s managing director TV Narendran, speaking to the Economic Times, was bullish about India’s steel sector, and made no secret of the fact that India would tremendously benefit from China’s manufacturing woes. He said, “The forecast is that Chinese consumption will stay flat and consumption outside China will grow…the growth in consumption will be driven more by markets outside China, and I’m more positive about this industry in India.”
According to ET, Tata Steel has plans to grow its capacity by at least 35-40 million tonnes by 2030 and is considering setting up ‘more scrap-based facilities’ in the coming years with a capacity of at least a billion tonnes by 2025. On Thursday, Tata Steel reported its highest ever consolidated operating profit of Rs 17,810 crore, up more than three times on the year, on the back of strong steel prices and higher deliveries. Consolidated net profit surged more than seven times to Rs 12,548 crore.
Xi Jinping’s Mad Drive to Destroy China’s Steel Sector:
Xi wants to reduce steel production in China. To do so, he has removed export tax subsidy on 23 steel products, which includes mostly downstream and value-added products. China claims that it is curtailing steel production in order to go carbon neutral by 2050. But we all know how much China cares about Climate Change. The real reason why Jinping is curtailing steel production is because the ban on Australian coal has created a void in China. Now, if steel plants are allowed to operate normally despite the grim coal stockpiles, the CCP regime will be exposed globally on a daily basis. So, in order to save itself the embarrassment, Jinping has shut down China’s steel industry altogether.
India’s Steel Might:
India is the second biggest steel manufacturer in the world, next only to China, though the difference is huge. China produced 1,064.8 million tonnes of steel last year compared to India’s 100.3 million tonnes. India also has a strong steel manufacturing industry in place, with an adequate supply of raw materials like iron ore and coal. Also, India doesn’t have any tussles with Australia unlike China and shares an increasingly cordial relationship with Canberra.
Meanwhile, India Ratings and Research (Ind-Ra), a Fitch Group company stated that the situation was ripe for Indian steel companies to fill the void, both in domestic as well as international markets, “China’s energy crisis and the resultant likelihood of shutting down of Chinese companies or intermittent curbs on manufacturing would prove advantageous to Indian companies, as the demand for their products is bound to rise in both the domestic and international markets.”
The Modi government has also rolled out a ₹6,322 crore PLI scheme for India’s steel sector. According to Business Line, it is expected that due to the implementation of the PLI scheme along with other measures taken by the government, production of speciality steel will increase by 140 per cent by FY27, over the baseline period of FY20, along with reduced import dependence to the tune of 76 per cent and increase in exports by 244 per cent.
India is beginning to snatch the steel sector from China, and it is nothing but magnificent.