India set to become second largest steel producer

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India is poised to dislodge Japan to become the world’s second-largest steelmaker, as mills ramp up production to record levels to feed growing demand for infrastructure, new homes and consumer goods, highlighting the potential for industry’s growth outside China.

Output will rise from 103 million tonnes (mt) this year to 110 mt in 2018, and 118 mt by 2019, according to projections released Friday by Australia, the top shipper of steel-making ingredients such as iron ore. The growth will see India draw level with Japan next year and eclipse it after that, according to the report. By 2022, India will pump out 146 mt to Japan’s 118 mt.

 Steelmakers in Asia’s third-largest economy are boosting supplies after Prime Minister Narendra Modi promised to spend more on infrastructure and power, and policy makers acted to resist a tide of cheap Chinese exports. Shares in local producers including JSW Steel Ltd. and Steel Authority of India, known as SAIL, have surged over the past year, buoyed by plans for expansions.

“Steel-consumption growth is expected to be driven by substantial infrastructure investment, growth in residential construction, and the growth of the shipbuilding, defence, automobile and manufacturing sectors,” the Department of Industry, Innovation and Science said in the report, which tracks trends in commodity markets related to Australian resource exports.

While Indian production is set to surge, its output will remain dwarfed by China, the world’s biggest producer. Mills in Asia’s top economy are seen making 805 mt this year, before supply trends lower to 800 mt in 2018 and 785 mt in 2022, according to the report.

India is the “bright spot” for growth in the global steel industry, according to BMI Research, which said demand from auto and infrastructure industries continues to accelerate. The government has been spearheading a push to boost capacity, with upgrades at existing mills as well as state-owned companies building new plants, it said in a report received on Wednesday.

The potential has been recognised by Australian iron miners, including Fortescue Metals Group, the country’s number-three exporter. The company’s mines in north western Australia are well-positioned to take advantage of expected growth in India, as well as Vietnam and the Philippines, Chief Financial Officer Elizabeth Gaines said in an interview this week.

JSW Steel traded 0.9 per cent higher in Mumbai on Friday, taking gains over the past 12 months to 61 per cent. The company reported output data earlier this week to show that it’s become India’s biggest producer. SAIL rose 0.7 per cent, and Tata Steel advanced 0.2 per cent.

Source:business-standard