India’s steel demand is projected to grow between 5-7% over the next 12-18 months, driven by faster economic and population growth, increased industrialization and urbanization, and supportive government policies, according to a report by Moody’s Ratings. In contrast, China’s steel demand is expected to decline slightly due to a sluggish property market and broader economic challenges.
“India’s real GDP is estimated to grow 6.6% in the fiscal year ending March 2025 and 6.2% in the following fiscal year, compared to China’s 4% growth for 2024 and 2025,” the report stated. This rapid economic expansion, combined with government initiatives such as increased infrastructure spending and incentives for domestic manufacturing, will bolster India’s steel demand.
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.
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.
“India’s robust domestic demand for steel, higher selling prices in the local market, and high self-sufficiency in iron ore will support higher steelmaking margins,” Moody’s noted. Additionally, Indian steelmakers are expected to maintain higher margins and lower leverage compared to their Chinese counterparts over the next year.
India’s per capita steel consumption remains significantly lower than China’s, indicating substantial growth potential. Current consumption stands at 70-80 kilograms per capita in India versus 660-670 kilograms in China.
The Indian government’s policies continue to drive consumption growth for steel, with significant allocations for infrastructure spending and housing projects under initiatives like the Pradhan Mantri Awas Yojana program. Meanwhile, China’s economic slowdown is attributed to weaknesses in the property sector, fiscal challenges at regional and local government levels, and geopolitical tensions.
Moody’s report highlights that while India’s steel sector faces challenges from Chinese overcapacity and import costs, its domestic demand, industry structure, and resource advantages position it for continued growth.