The poor performance of China’s property sector since 2021 has created significant overcapacity in the country's steel industry, leading to a collapse in global prices of steel and putting Indian steel producers under significant pressure, according to India’s Economic Survey 2023-24 placed before the Indian parliament on Monday, July 22.
China’s manufacturing trade surplus has been ballooning since 2019 due to weak domestic demand and expanding industrial capacity and this has led to Chinese companies exploring markets overseas, leading to prices collapsing globally and driving other national producers out of business, especially in product categories where China dominates, stated the survey, prepared by the ministry of finance and placed before parliament on the eve of the presentation of the national budget for 2024-25.
For instance, China’s steel product exports have grown 27 percent so far in 2024 on top of a 35 percent growth last year, the survey noted.
India started as a net exporter of steel in the first quarter of the financial year 2023-24 but became a net importer in subsequent quarters - again becoming a net importer of steel after having achieved net exporter status in the last decade.
“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 survey said.
India imported 1.9 million mt of finished steel during the April-June quarter of the fiscal year 2024-25, which was 28 percent more than the same period a year earlier. Exports of steel during this period fell by 36 percent year on year to 1.3 million mt, widening India’s net imports. India’s apparent steel consumption during the quarter was 35 million mt.
“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,” the survey said.