Chinese firms equipped to prosper in India steel sector

Pace of economic development and infrastructure expansion offers a wealth of opportunities, reports Du Juan in Jamshedpur, India.

India's steel capacity is expected to soar in the next 15 years, driven by the country's growth in infrastructure construction, which will create a huge market for Chinese equipment manufacturers, said a senior executive of Tata Steel Ltd.

T.V. Narendran, managing director of Tata Steel, said India now has 80 million metric tons of steel production capacity and that it will grow to 300 million tons in the next 15 years in tandem with the pace of economic development.

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"We will need Chinese equipment and technology suppliers for our steel industry's growth, since China has a mature steel industry after decades of development," he said.

It is accepted in the steel industry that it costs about $1 billion to add 1 million tons of capacity, and equipment accounts for 30 percent of that cost, which means India will create a market valued at $66 billion for steel production equipment in the next 15 years.

"Normally, India's steel companies buy equipment from Europe. Since many European companies are producing in China, we can purchase directly from China in the future," said Narendran.

Tata Steel will strengthen its sourcing relationship with China in the next few years.

Narendran said about 10 percent of the company's equipment - mostly coking ovens and reheating furnaces - comes from Chinese suppliers, and Tata Steel's intention is to increase the amount to 30 to 40 percent in the next three to five years.

"To achieve that goal, we will form a team of 10 to 15 people, based in Beijing or Shanghai, to source in China," he said.

Narendran said that in the past 20 to 25 years, China's infrastructure construction developed rapidly, which created huge demand for steel and brought a "golden age" for China's steel mills.

However, China is now facing severe overcapacity in the steel industry, which has been hit by weak demand and continued losses.

Narendran said India's steel industry will continue to grow on the strength of the government's decision to focus on infrastructure construction.

According to Tata Steel, steel consumption is expected to rise in India by about 6 percent to 7 percent annually.

"For Chinese steel companies facing overcapacity problems in their domestic market, it can be a good idea to invest in India," said Narendran, adding that India's steel market is open to foreign investors.