India’s Steel Consumption Outpacing China

India’s steel industry is poised for substantial growth in the coming 12-18 months, with demand expected to rise between 5-7%. This forecast, detailed in a recent report by Moody’s Ratings, positions India to outstrip China’s demand growth amid the latter’s anticipated economic slowdown, particularly influenced by a struggling property market.

Moody’s analysis indicates that India’s real GDP is projected to expand by 6.6% in the fiscal year ending March 2025, followed by a growth rate of 6.2% in the subsequent fiscal year. In stark contrast, China’s GDP growth is estimated at a mere 4% for both 2024 and 2025. This divergence underscores India’s burgeoning economic momentum, spurred by a combination of increased industrialisation, urbanisation, and government policies that favour infrastructure spending and domestic manufacturing. While India’s steel sector enjoys a robust outlook, challenges remain. China’s ongoing overcapacity and high production levels may lead to increased steel exports to India, which, alongside domestic capacity growth, could suppress regional steel prices. However, India’s concentrated steel industry structure offers a more disciplined pricing environment compared to China’s fragmented sector, allowing for greater stability.

A significant advantage for India is its vast iron ore reserves, which afford the country higher vertical integration and improved profit margins relative to Chinese producers. Yet, China maintains an edge in coking coal import costs due to its geographical proximity to suppliers in Mongolia and Russia. In contrast, India primarily relies on more expensive imports from Australia. Moody’s emphasised that India’s strong domestic demand for steel, combined with higher local selling prices and substantial self-sufficiency in iron ore, will support better steelmaking margins in the near future. Notably, India’s per capita steel consumption, currently standing at just 70-80 kilograms, remains considerably lower than China’s 660-670 kilograms, indicating ample room for growth. Government initiatives, such as the Pradhan Mantri Awas Yojana programme, continue to underpin steel consumption growth through significant infrastructure and housing project allocations. Conversely, China grapples with economic vulnerabilities stemming from a weak property sector, fiscal difficulties at various government levels, and geopolitical tensions.

Overall, Moody’s report highlights that despite challenges posed by Chinese overcapacity and import costs, India’s steel sector is strategically positioned for sustained growth. The emphasis on infrastructure development, urbanisation, and supportive government policies ensures that India’s steel demand will likely exceed that of China, reinforcing the country’s role in the global steel market.