COVID-19 has impacted global trade as never before and the impact of the pandemic is here to stay. As a fallout of the pandemic many companies, including Korean and Japanese steelmakers, are mitigating ways to reduce their exposure and dependency on China.
China has been the growth engine of the global economy with nearly 25pc of the world’s manufacturing operations stationed in the country. It was logical for steelmakers to have their plants in mainland China to serve its ever-growing automobile, construction and manufacturing sectors. But post the pandemic and the resultant lockdowns, multi-national companies are reshuffling their manufacturing bases and restructuring supply chains to protect their operations and profits from risks similar to the COVID-19 crisis.
Two Korean iron and steel producers have expressed interest in setting up plants in India, as per a South Korean consulate official quoted by local media reports. The companies are in consultation with the Indian government for 5,000 acres of land close to port. Hyundai Steel and Posco are planning to set up plant in Andhra Pradesh, according to local media.
Japan has set aside a funding package of $2.2bn for companies to return their production bases from China to Japan or diversify their manufacturing into ASEAN countries. Japanese companies depend a lot on Chinese imports for their production and since the trade war between China-US intensified more and more Japanese companies are planning to move out of China. Earlier in February, India’s Steel Minister was in talks with Japanese investors to establish long-term technology partnerships with the Indian steel industry.
In 2019, steel production grew by 8pc growth in China while it declined by 2pc in the rest of the world from a year ago. While overall global steel production declined by 6pc in March and China’s output dipped by 2pc from a year ago. The decline in China’s March output was to align with lower demand and inventory built up during COVID-19 outbreak in the January-February.