India says it should learn from China in steel industry

The Chinese government is planning to form one or two super-scale steel complexes with individual production capacity in excess of 100 million tonne by 2015, as well as a certain number of 50-mt steel enterprises, according to a government statement. But it is not clear from the statement whether the government is aiming at creating single-site complexes of this proportion or enterprises with facilities in multiple sites. However, the language of the reports seems to indicate single site plants. This is a huge development as it comes as a part of their new steel policy, currently under discussion. There are no reasons to undermine such ideas and brush them aside as ambitious and unrealistic propositions. The Chinese government has realised the potential of the country s steel consumption growth and therefore is readying the industry for a huge capacity expansion in the coming five to 10 years. The steel policy adopted in 2005 has become outdated and rightly so, considering the pace at which the industry grew in the subsequent years, exceeding all projections. A new perspective is also due in view of the consequences of the global economic meltdown that was not foreseen. The new steel policy, likely to be out in 2010, has bigger plans, larger vision and will take the task of building the nation s steel industry for the coming decades in terms of technology, scale, costs, raw materials and environmental safety. China is back to drive the global steel market once more. The month of October has witnessed record steel production and the very fact that the industry grew at over 16% that month clearly indicates the potential of the market growth in the days ahead. There is a general consensus emerging that nothing is going to change in the country adversely despite the common belief that the banks out there are in trouble and that the government cannot sustain the current level of economic growth with stimulus spending. But, contrary to this common logic and understanding, the Chinese economy is headed to a faster growth, with massive infrastructure development projects, accompanied by unprecedented rise in domestic consumption. The Chinese banks, seen more as a part of the nation s financial infrastructure than pure commercial entities engaged in the business of borrowing and lending, are sure to be backed by the government and there is no possibility of any one of them sinking. The early signs of a strong revival of the steel market, reminiscent of the period prior to the global economic crisis, are already visible. This augurs well for the steel industry in China. The outcome of such a growth, however, will have different implications for different countries depending on the position the steel or the mineral industries hold in each country. The new policy, drafted and circulated currently for discussion, is not merely to inject growth momentum into the industry, but, to make it globally competitive. The government actively discourages smaller producers. Most of these plants compete among themselves for iron ore or other raw materials to effectively raise their prices on the world market. At the same time, they compete for space in the finished products market and bring down the steel prices and lose revenue. This reduces the profitability in the industry, makes many of them sick, adding liability of the banks. It is high time Indian government comes out with a new steel policy. Let the policy document not be a pack of unrealistic ambitions, but one that provides a direction of the industry the government wants to see considering the market demand potential, land and other social issues, environmental and climate change subjects, assessment of raw materials supply situation, desirable scales of operation - small or large, integrated or disintegrated in the vertical chain, human resource development, competition issues and the role the government will play in the business of steel - as an owner and also a regulator. The global economic crisis of 2008 has left many lessons to learn. The business as usual will not work for Indian steel as the challenges tomorrow will be different from what they are now and the industry will have to act differently if growth is in its agenda. It is time that China s steel policy draft is studied in depth.

Moderator's Edit: Link removed.
Last edited by shadowshiv; Nov 19th, 2009 at 06:34 AM..
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