Singapore: India is poised to dislodge Japan to become the world’s second-largest steelmaker as mills ramp up production to record levels to feed growing demand for infrastructure, new homes and consumer goods, highlighting the potential for industry’s growth outside China.

Output will rise from 103 million tons this year to 110 million in 2018, and 118 million by 2019, according to projections released on Friday by Australia, the top shipper of steel-making ingredients such as iron ore. The growth will see India draw level with Japan next year and eclipse it after that, according to the report. By 2022, India will pump out 146 million tons to Japan’s 118 million.

Steelmakers in Asia’s third-largest economy are boosting supplies after Prime Minister Narendra Modi promised to spend more on infrastructure and power, and policy makers acted to resist a tide of cheap Chinese exports. Shares in local producers including JSW Steel Ltd. and Steel Authority of India Ltd. have surged over the past year, buoyed by plans for capacity expansions,

“Steel-consumption growth is expected to be driven by substantial infrastructure investment, growth in residential construction, and the growth of the shipbuilding, defence, automobile and manufacturing sectors," the Department of Industry, Innovation and Science said in the report, which tracks trends in commodity markets related to Australian resource exports.

While Indian production is set to surge, its output will remain dwarfed by China, the world’s biggest producer. Mills in Asia’s top economy are seen making 805 million tons this year, before supply trends lower to 800 million in 2018 and 785 million in 2022, according to the report.

‘Bright spot’

India is the “bright spot" for growth in the global steel industry, according to BMI Research, which said demand from auto and infrastructure industries continues to accelerate. The government has been spearheading a push to boost capacity, with upgrades at existing mills as well as state-owned companies building new plants, it said in a report received on Wednesday.

The potential has been recognized by Australian iron miners, including Fortescue Metals Group Ltd., the country’s number-three exporter. The company’s mines in northwestern Australia are well-positioned to take advantage of expected growth in India, as well as Vietnam and the Philippines, chief financial officer Elizabeth Gaines said in an interview this week. Bloomberg

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