China, the world’s largest consumer and producer of steel, has started slashing production of the metal amid slowing demand following the collapse of real estate behemoth Evergrande Group.
According to Trading Economics, steel production in the country slowed to 71.6 million tonnes in October after touching almost 100 MT in May this year.
The steel sector in China has been booming as the real estate industry drove the country’s economic growth.
The uncertainty in the real estate sector would have a direct impact on other commodities such as cement and steel and this has happened when there are already major supply side constraints in the country,” DK Srivastava, chief policy adviser, EY India told India Narrative.
Earlier Tata Steel’s managing director TV Narendran told the Economic Times that India could stand to benefit as China cuts production.
“The forecast is that Chinese consumption will stay flat and consumption outside China will grow…the growth in consumption will be driven more by markets outside China, and I'm more positive about this industry in India,” the news organisation quoted Narendran as saying.
The India Brand Equity Foundation noted that in 2021-22, crude steel production in India is estimated to increase by 18 per cent to reach 120 million tonnes, driven by rising demand from customers.
Between January and October this year, India steel production has increased 20.6 per cent while it dropped by 0.7 per cent in China though Beijing continues to be the largest producer.
Meanwhile, Reuters in a report said that debt problems at a major Chinese property developer have now spilled over into a vital artery of the nation's industrial engine – the steel sector – and started to ripple through to other critical parts of the world's second-largest economy.
The report added that the steel sector’s acute sensitivity to the ebbs and flows in construction and manufacturing makes it a closely-tracked bellwether for China's economy, which has started to slow down from the second quarter.
