As China’s recovery slows, global businesses turn to India

The sluggish recovery in China more than six months after easing pandemic restrictions has led global businesses to shift focus to India, where incentives are being offered to set up shop and boost production.

Last month, China’s exports and imports fell more sharply than analysts’ expectations, fueling concerns about growth prospects in the world’s second-biggest economy. 

Exports slumped 14.5% year-on-year in dollar terms, the steepest such decline since February 2020 during the beginning of the covid pandemic, data released on Tuesday showed. Imports fell 12.4% in July.

Australian producer of metallurgical coal-a key element in steel production-Coronado Global Resources is among global businesses betting big on India amid the slump in demand from China.

“Chinese steel production levels remain high; however, weak domestic demand conditions continue to put pressure on steel margins, forcing steel mills to divert volume to the export market,” Coronado said in its quarterly earnings report.

“Expectations of further stimulus measures and incentives to improve the China real estate market are likely to improve demand and price sentiment in late-Q3,” it said, adding that the end of the monsoon season in India and continued growth for planned infrastructure projects will lead to a pick-up in demand.

“With signs that global inflation is beginning to moderate, increased economic confidence and activity will help stimulate demand for steel and met coal, Coronado managing director and chief executive Douglas Thompson said in the report. 

India, one of Coronado’s largest export markets, is likely to lead in import demand growth amid a strong push for urbanization and industrialization, the company said. 

Coronado said it expects coking coal demand from India to increase to 228 million metric tons (mmt) by 2040, up 226% from 2022 levels. 

Crude steel production in India is expected to grow from 125 mmt to 367 mmt by 2040, an increase underpinned by blast furnace steel generation methods. A A blast furnace is used for smelting to produce metals, especially iron, from ore.

India is projected to grow at 5.6% in 2023 and 2024, while Coronado’s other key markets, other than China, are expecting to grow at a modest 2%, it added in the report.