Data on Chinese steel output and consumption and its comparison with that of India have not been that easy. The dissimilarity of the data is widening, as more micro statistics are made available. The latest forecast by IISI has brought down the apparent steel consumption in 2003 by as high as 20 million tones from 884 million tones assessed earlier to 864 million tones and the major drop has been in the case of China. The recent coverage of Chinese steel industry by World Steel Dynamics, one of the most authentic international publications on global steel, has shown that there is double counting in assessment of Chinese steel output and after discounting the double counting to the extent of 24 million tones in 2003, the real consumption of steel in China comes to 247 million tones. This is approximately 15 million tone more than 232 million tone for China indicated by IISI for 2003. In other words the figure for real steel consumption net of double counting is more than the apparent steel consumption figure in case of China, which is not what our common sense tells us.

A cursory glance at the various components of steel output data compiled by China Iron and Steel Association shows that Wires (made out of Wire Rods), Seamless Tube and Welded Pipes form nearly 22 percent of the reported steel output of China for 2002. Even assuming that wires may represent wire rods and welded pipes are none else than large dia pipes and tubes included in reported steel output of India, the inclusion of seamless tubes and stainless coils and sheets to the extent of 3.5 percent of the total output or nearly 6.7 million tonnes substantially reduces the sources of variation of the two output figures. But the fact remains that data are not uniform which makes realistic comparison rather mundane.

Having said about some of the inconsistent parameters on basic data we may look into the wide variation on the product-cum-segment components in steel consumption of the two countries.

Net of double counting and taking into consideration under-reporting in case of long products the long-flat ratio in India is likely to be approximately 53:47 almost similar to that of China. Both China and India reflect the traditional features of developing countries having long product share exceeding that of the flats with Pipes and Tubes chipping in. The product profile consumption is basically an outcome of the steel flow in the economy to various sectors, which need steel in a variety of sizes/grades/dimensions. The pattern of sectoral development ultimately determines the steel intensity of growth potential. The following table summarises the story so far.

Some of the notable factors contributing to the fluctuations in steel cycle are obvious, as gradual integration of Indian steel market with the global market has made it imperative to monitor the movement of these parameters.

The sectoral distribution of steel consumption in both the countries brings out certain truths of economic development. For instance, nearly 20 percent more steel consumption in construction sector in China as compared to India reflects the massive investment being made in infrastructure in China leading to predominance of long products in total steel consumption. It is interesting to note that Oil and Gas and Railways have a higher share of steel consumption in India accounting for a major share in plates, pipes and Rails. On the other hand, a large component of steel output in India goes for Tube making, cold reducing, fabrication, wire drawing and fastener sectors. It is not clear from the table if the supply to these segments has been taken care of in China under the broad group of Machinery as the primary role of the various processing industries in the take-off stage can hardly be over-emphasised.

The spectacular growth of steel consumption in China owes its origin to a 49 percent share of the Secondary sector in GDP. It comprises of Mining, Manufacturing, Electricity, Gas and Water Supply and Construction sub-sectors. It is needless to mention that steel-intensity of these sub-sectors is the maximum as compared to other sectors in the economy. At the same breadth it is to be appreciated that the above identified sectors would exhibit growth potential depending on the investment made into them, A rough analysis shows that while 40-42 percent of GDP has been earmarked for investment in China, the comparable figure for India is a mere 25 percent. This 15-17 percent gap in investment ratio between the two countries and that too on a much larger GDP base may provide the fundamental clue to the wide differential in steel consumption in the two countries. As fresh capacity creation in steel requires massive investment, a lower capital formation index for India would imply that investment rates are to enhance substantially if the projected demand for steel in the coming years are to be met.

There is a viewpoint that low saving rate which otherwise implies a high rate of consumption is good for India since higher consumption expenditures lead to high demand for goods and therefore goods containing steel would in response register a growth in output. Here a distinction needs to be made between consumption expenditure and capital expenditure. The low saving rate in India is characterised by a growing component of household saving, while there has been dissaving in the domain of public sector for the last few years. A larger share of household saving is likely to manifest itself in the form of a higher demand for household goods. On the other hand higher capital expenditures are to be sustained by high rate of saving in the public/corporate sector. This is where China has taken a big leap forward and capital investment for steel-intensive sectors in India has taken a comparatively backseat.

It therefore appears that lower contribution of secondary sector to GDP coupled with low rate of investment and saving are the primary factors responsible for India's slower rate of growth of steel consumption as compared to China. Notwithstanding an exaggerated output and consumption figures, China's progress chart in these respects is too well established to leave any scope for India to catch up with China in the near future. Apparent consumption of steel in China has been growing at an average rate of more than 12 percent during the last decade and more than 15 percent on an average in the last four years. India's has been growing at an average rate of 6 percent during the last decade and at around the same rate in the last four years. By just doubling the pace, India's steel consumption cannot reach beyond 100 million tones at the end of 2013. But doubling the rate from the current 6 percent to 12 percent would remain a dream unless the above three parameters exhibit an unparalleled upward movement. Alternatively at a 8 percent annual average rate the consumption of steel may reach around 70 million tones at the end of next decade.