Will India Show Resilience To Global Steel Slowdown? [Infographic]

While cement, steel, and electricity are key components of infrastructure developments, costs of the first two commodities have a huge bearing on property prices. Further, cement and steel are internationally traded commodities and are similarly priced across the world. This is one of the major reasons why apartments in India are expensive, despite an ongoing effort to make residences affordable. Further, while the cost of floor space is globally determined, income levels are locally determined. This also raises the price of real estate in India, relative to income.

The produce and the consumption

Even though India is one of the world leaders in production of cement and steel, this overstates India's production and consumption of the two commodities. While India is the world's second-largest producer of cement, it produced only 280 million tonnes (MT) of the commodity in 2014, compared to China's 2,500 MT. This is nearly 11 per cent of the cement production in China.

(2015 and 2016 figures are projections)

In steel production, too, facts are bizarre. Though India is the third-largest producer of steel in the world, per capita steel consumption in India is nearly one tenth of that of China. However, the World Steel Association (WSA) predicts that demand for steel in India would rise in 2015 and 2016, despite a slowdown in demand globally. While it is hard to say how resilient India would be to the global slowdown, here are some facts about production and consumption of steel in India from WSA:

Demand for steel in India was 75.9 MT in 2014, but the WSA expects demand to rise to 81.5 MT and 87.6 MT in 2015 and 2016, respectively. This is remarkable, because global demand for steel is expected to decline by 1.7 per cent this year, though it grew by 0.7 per cent in 2014.

The WSA expects the demand for steel in China to decline by 3.5 per cent in 2015 and two per cent in 2016.

Some economists expect the declining demand in China to adversely affect producers of steel in India. The reason is that in India, in the recent past, imports of steel have risen by 70 per cent, and much of this is from China. This has made many steel companies in India debt-ridden. If the demand in China declines further, Chinese companies are likely to export steel at cheaper prices, lowering the profit margins of Indian steel companies.

Even though India's steel consumption is unusually low by global standards, WSA expects this to rise significantly when the country develops in the near future. Steel production in India has been high since January 2015.