Chinese firms equipped to prosper in India steel sector

James Zhan, president of Tata Group China, said Narendra Modi had been to China four times before he became India's prime minister and he knows China well.

"India is an important partner for China in the manufacturing and infrastructure sectors, where China has rich experience and excess capacity," Zhan said. "China's capital and capacity offers potential cooperation opportunities for the two countries."

However, investing in India's steel industry is not an easy task.

Zhan said land acquisition is one of toughest areas during investment, and it can take a very long time to accomplish.

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"It is even a tough problem for Tata Steel, not to mention Chinese companies," he said.

And language is an obstacle.

"Up to 30 percent of Indian people speak English. Even though an increasing number of Chinese speak English nowadays, most senior executives of Chinese companies still depend on translators, which brings difficulties in the practical work," Zhan said.

Xu Lejiang, chairman of Baosteel Group, one of China's biggest steelmakers, said that India will follow a path similar to China's in terms of industrialization, which means growing steel demand from India in future years.

He said that against the backdrop of excess steel capacity in China, it is feasible for Chinese steel companies to expand overseas.

Developing regions, including the Middle East, Africa, Southeast Asia and Eastern Europe all offer potential opportunities for Chinese steel investors, he said.

Facing weakening domestic demand, most Chinese steel companies have experienced big growth in exports this year.

During the first eight months, China exported 56.4 million tons of steel products, up 34.3 percent year-on-year. Net steel exports grew to a record high, rising 42.7 percent to 49.72 million tons, according to the China Iron and Steel Association.

Qu Xiuli, deputy secretary-general of the CISA, said during the China Steel Technology and Economy Forum last week that steel exports will continue to grow in the second half of 2014.

She mentioned that major Chinese steel companies, including Baosteel and Hebei Iron and Steel Co Ltd, are increasing their presence overseas by establishing industrial production bases.

China's biggest steel producer, Hebei Iron and Steel, plans to build a mill with 5 million tons of capacity in South Africa. That plan was announced by the company on Sept 12.

The company signed a deal to take a 51 percent stake in a venture with the Industrial Development Corp of South Africa and the China-Africa Development Fund to build the mill, which will become China's biggest overseas steel project.

The company plans to start construction in 2015, with first-phase production to begin in 2017.