New Delhi: India’s steel sector is set to outpace China in terms of demand growth over the next 12-18 months, driven by robust economic and population expansion, increased industrialisation and urbanisation, and supportive government policies.
According to a recent report by Moody’s Ratings, India’s steel demand is projected to rise between 5-7% during this period, in stark contrast to China’s expected slight decline due to a sluggish property market and broader economic challenges. Moody’s report underscores that India’s real GDP is estimated to grow by 6.6% in the fiscal year ending March 2025, and by 6.2% in the following fiscal year. In comparison, China’s GDP growth is projected at 4% for both 2024 and 2025. This rapid economic expansion, coupled with government initiatives such as increased infrastructure spending and incentives for domestic manufacturing, is set to bolster India’s steel demand significantly.
Despite the promising outlook, China’s overcapacity and high production levels are likely to lead to increased steel exports to India. This influx, combined with India’s own capacity growth, could suppress steel prices in the region. However, India’s concentrated steel industry structure provides better pricing discipline compared to China’s fragmented sector. A key advantage for India’s steel industry is its abundant iron ore reserves, which allow for higher vertical integration and better profit margins than Chinese producers. Nonetheless, China benefits from lower coking coal import costs due to its proximity to suppliers like Mongolia and Russia, while India primarily imports more expensive Australian coking coal.
“India’s robust domestic demand for steel, higher selling prices in the local market, and high self-sufficiency in iron ore will support higher steelmaking margins,” Moody’s noted. Additionally, Indian steelmakers are expected to maintain higher margins and lower leverage compared to their Chinese counterparts over the next year. India’s per capita steel consumption remains significantly lower than China’s, indicating substantial growth potential. Current consumption stands at 70-80 kilograms per capita in India, compared to 660-670 kilograms in China. Government policies in India continue to drive consumption growth for steel, with significant allocations for infrastructure spending and housing projects under initiatives like the Pradhan Mantri Awas Yojana programme. Meanwhile, China’s economic slowdown is attributed to weaknesses in the property sector, fiscal challenges at regional and local government levels, and geopolitical tensions.
Moody’s report highlights that while India’s steel sector faces challenges from Chinese overcapacity and import costs, its domestic demand, industry structure, and resource advantages position it for continued growth. The strategic focus on infrastructure and urbanisation, supported by favourable government policies, ensures that India’s steel sector is well-placed to capitalise on future opportunities, outpacing its Chinese counterpart in demand growth.
