CAN INDIA BE THE NEXT CHINA?

MEPS Steel News

India is currently the world’s 8th largest steel producing country – with nearly 33 million tonnes of crude steel output in 2004 – and is increasingly being talked of as the next China. With a 12 percent increase in supply in the first half of this year, Indian steel production is growing strongly. Now the government is working on plans for a massive expansion. But, unless Indian demand also rises quickly, excess capacity will develop and put pressure on world markets.

The Indian government’s new National Steel Policy has not yet been approved, but steel minister Ram Vilas Paswan recently revealed its broad outlines to parliament. The chief goal is to increase steel production to 110 million tonnes by the 2019/20 financial year. This would mean tripling the current rate.

Because the government no longer regulates the steel sector, as it did until the early 1990s, it does not actively plan or implement steelworks expansions – other than at the state-owned companies. It now sees its role as facilitating growth by removing impediments and bottlenecks, particularly on the supply side of the industry.

So the new policy will include a series of measures designed to improve the availability of raw materials such as iron ore and coal. It will also encourage the creation of infrastructure such as the roads, railways and ports that will be required to support the steel industry’s growth.

The article goes on to discuss the iron ore and coal situation in India, what impediments exist, what the Indian government could do to remove them, the likelyhood that domestic demand could rise at the same speed as production, and what would happen to the excess steel production. Pretty interesting stuff.

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