Steel Demand: Rising in India as Fast as in China

When I visited Shanghai earlier this year, I, like many foreigners, was absolutely struck by the amount of buildings going up in the city. In my lifetime, I don’t think there's been anything like it. But on a year over year basis, construction consumes less regional steel than one might first imagine. It turns out that what really drives country steel consumption is the growth of its manufacturing economy, especially in the automotive, heavy industry, and diversified verticals. In 2005, steel consumption in China increased by more than 10%, representing over 60 percent of the total world growth for the year. But India's appetite for the economic bellwether commodity is not far behind. According to one article that I recently looked at, steel consumption is growing in India in excess of 10% annually.

According the piece, India's thirst for steel "is led by strong industrial and manufacturing growth and increased economic activit ... [the country] is at a take off point and is likely to become a global sourcing hub for various products like steel, auto & auto components, engineering goods, etc." Now, granted, it's a shame that India's public sector is not consuming more steel to improve its shamefully backwards logistics and transportation infrastructure, but I'd argue that private sector manufacturing growth will force the state and national bureaucrats to finally get their act together when it comes to bringing the overland, rail and port systems up to a second -- let alone a first -- world level in the not so distant future.

Jason Busch

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