Charge of the Steel Brigade
Who would have imagined that, of all things, Indian steel would cause
a stir in China? China is now the world’s largest consumer of steel,
consuming some eight times the steel we do. China is also the world’s
largest producer of steel and in recent years has emerged as the world’s
largest importer of steel as well. Two-three years ago, India was a
minuscule exporter of steel to China. This year upto September 2003,
Indian steel accounts for 6-7% of Chinese steel imports. Five companies-SAIL,
Tata Steel, Ispat, Jindal and Essar-account for about three-fifths of
these exports. For the first time, during January-September 2003 the
bilateral trade balance has swung in India’ favour. This is entirely
because of steel exports that have, according to Chinese data, amounted
to around 1.6 million tonnes in the first nine months of 2003. And it
is important to reconcile data: fbor 2002, India says its exports amounted
to 262,000 tonnes while the Chinese claim it was 480,000 tonnes.
The Chinese have made their discomfiture known by telling the Indian
government that Indian steel exports have crossed the critical threshold
of 3% of imports. The WTO allows any country to take protective measures
when this level is crossed. Last year, China took action against a series
of countries but exempted India. Now, they are telling India to moderate
steel exports. The Big Five have gone out of their way to assuage the
Chinese saying that when Indian steel demand picks up, exports would
automatically reduce. Presently, about 10% of India’s steel output is
exported, of which roughly half is to China alone.
Do the Chinese really consider India as a competitive threat in steel?
No. The real reason for their churlishness on steel lies elsewhere.
They are most unhappy that China attracts the maximum anti-dumping investigations
and duty impositions by India. The Chinese are also not pleased by the
ambivalence that India is showing on Chinese investments here. While
indeed ONGC is a joint venture partner with the Chinese National Petroleum
Corporation in Sudan, many sections of the ruling establishment in New
Delhi consider the expanded presence of Chinese companies in India in
telecom, ports, mining, power and software as a major security threat.
What must be galling to the Chinese is that for their part Indian companies
are slowly increasing their investment presence in China in diverse
areas like IT, pharmaceuticals, auto components, chemicals and engineering.
India must also explore new avenues of “win-win” cooperation
in steel. China is desperately short of good-quality iron ore. India
is already the third largest supplier of iron ore to China after Australia
and Brazil. China wants to buy more. In a recent interaction with the
Chinese Iron and Steel Association in Beijing, one of India’s most outstanding
techno-managers, B. Muthuraman the Managing Director of Tata Steel came
up with an innovative idea. Make semi-finished steel in India from Indian
iron ore and thereby add value in India itself. Then manufacture finished
steel in China thereby adding further value there. Indian is making
overtures to the Chinese to get them to enter into long-term contracts
for iron ore supply. The Muthuraman proposal is even better that needs
to be given support at the highest level since that still counts while
doing business with China.
Going beyond steel, Indian companies must appreciate that what matters
most in China is scale and speed. More than that, provinces and municipalities
who enjoy greater powers than their Indian counterparts are crucial.
Recently, a delegation from Chengdu city was in the country and this
week another team from Zhejiang province is here to solicit investments.
Yunnan and Sichuan are keen on expanded cooperation with India both
at a public and private level. Indeed, the future of India’s east and
northeast is inextricably linked to such cooperation involving Bangladesh
and Myanmar as well.
