India’s steel demand will outpace China’s demand over the next 12-18 months supported by faster growth in GDP in India, according to a steel sector report issued by Moody’s Rating on Friday, May 10.
China and India are two of the largest steel producers in the world, accounting for over 60 percent of global production.
“We expect India’s steel demand to grow 5-7 percent against four percent growth in China in 2024 and 2025. India’s steel demand will be supported by 6.6 percent growth in GDP in the fiscal year 2024-25 and 6.2 percent in the following year,” the Moody’s report said.
This rapid expansion, combined with government initiatives such as increased infrastructure spending and incentives to domestic manufacturing, will bolster India’s steel demand, the report said.
China's overcapacity and high production levels are likely to increase steel exports to India, which, combined with India's capacity growth, could suppress steel prices in the region. However, India's concentrated steel industry structure provides better pricing discipline compared to China's fragmented sector, the report said.
India's steel industry benefits from abundant iron ore reserves, allowing for
higher vertical integration and better profit margins than Chinese producers. Nonetheless, China has an advantage in coking coal import costs due to its proximity to suppliers like Mongolia and Russia, whereas India primarily imports more expensive Australian coking coal, Moody’s Rating said in the report.