India’s construction boom, with gleaming highrises and expanding multilane highways, was expected to boost domestic steel sales. However, Jogindra Group’s mills in northern Punjab are currently facing a surplus of unsold inventory.
The inexpensive Chinese steel has put significant pressure on India’s smaller steel mills, forcing many to scale back operations and contemplate job cuts.
India, the world’s second-largest steel maker, is now a net importer in the last fiscal year, sounding alarms in New Delhi about what a weakened sector portends for the security of future infrastructure projects and steel-reliant industries, reported Reuters.
At an average mill, which accounts for 41% of India’s total steel output and employs more than 1.5 million people,the utilization capacity has dropped by nearly a third over the past six months, executives from a dozen such producers said in interviews.
In Mandi Gobindgarh, known as Punjab’s “steel city,” local mills are struggling to compete with Chinese imports, as they are frequently priced up to 10% lower than Indian steel products.
“If we are not able to compete in the market, our plant won’t run at full capacity, We will be forced to lay off 10% to 15% of our employees here if this continues,” said Adarsh Garg, chairman and managing director at Jogindra Group.
Despite the pricing products on sale the company has witnessed a 30% to 35% drop in their sales for the past six months, reducing their production by nearly a third., Mr. Garg added.
Raju John, director general of the Builders Association of India, said developers and engineering firms are drawn to cost savings while Chinese steel sells for $25 to $50 a metric ton cheaper and sometimes as much as $70.
Finished steel imports from China hit a record high this year, rising over 30%. These imports included both hot-rolled steel for construction and galvanized steel for the automotive industry.
The influx has severely impacted domestic sales, while China’s lower prices have also undercut Indian exports.