Mumbai: 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 the alloy, India's Economic Survey 2023-24 tabled in parliament on Monday said.
This (Chinese overcapacity and exports) is putting "significant pressure" on steel producers in India, Vietnam, Brazil, and other countries, it added.
The observations on the steel sector were part of a larger commentary about the Chinese manufacturing juggernaut having become a threat to emerging markets and developing economies (EMDEs).
China’s manufacturing trade surplus has been ballooning since 2019 due to weak domestic demand and expanding industrial capacity, the latest Economic Survey observed. 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, the survey highlighted.
For instance, China’s steel product exports have grown 27% so far in 2024 on top of a 35% growth last year.
Meanwhile, India started as a net exporter of steel in the first quarter of FY24 but turned net importer in subsequent quarters. The country again became a net importer of the alloy 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 Economic Survey said.
India imported 1.9 million tonnes of finished steel during the April-June quarter of the ongoing financial year, which was 28% more than the same period a year ago, as per government data published by Joint Plant Committee. Export of steel during this period dipped 36% year-on-year to 1.3 million tonnes, widening India’s net imports. India’s apparent steel consumption during the quarter was 35 million tonnes.
The growing threat of Chinese exports, in steel as well as other sectors, is driving many emerging economies to impose fresh trade barriers, the Economic Survey noted. “These protectionist measures directed against Chinese products are emerging due to the threat that the overcapacity in China's manufacturing sector is posing to other countries, especially in the EMDEs.”
China has started retaliating against these import restrictions. For instance, in response to India’s anti-dumping probe against Chinese entities, China has been quietly blocking India’s access to solar equipment, as per the Economic Survey.
“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,” it said.
