China's 'compulsive overproduction' of steel is 'the new Opium War': Zoho's Sridhar Vembu

Tech firm Zoho Corp's founder Sridhar Vembu on Monday accused China of starting "the new Opium War" due to its "compulsive overproduction" of steel.

He was responding to Carnegie Endowment's Michael Pettis' tweet, ""Demand for steel in China is recovering on greater investment in infrastructure and manufacturing as well as stronger exports, but output continues to outstrip demand, putting great pressure on steel mills."

Vembu said: "Chinese policy can be summarized as "compulsive overproduction". This is not good for China, and it is not good for the world. In India, it has caused import dependence, even "addiction". This the new Opium War, this time waged by China. This is not a free market phenomenon."

The First Opium War (1839-1842) was fought between China and Britain, in response to Britain's illegal importing of opium into China from India. In the second Opium War, from 1856 to 1860, China fought both Great Britain and France. China lost both wars.

Last week, China's biggest listed steelmaker, Baoshan Iron & Steel Co, said it expects the country's 2023 crude steel output to be flat or slightly lower than last year, an executive said on Friday, in line with broader market expectations.

China's huge steel market is waiting for official confirmation that Beijing will continue a mandate started in 2021 to cap steel output to help it meet emissions goals.

The comments on output were made by chairman Zou Jixin during a briefing after the release of Baosteel's first-quarter earnings.

Baosteel produced 11.87 million tonnes of iron and 12.83 million tonnes of steel in the first quarter of 2023.

It is aiming to produce 48.77 million tonnes of iron and 50.89 million tonnes of steel this year, the company also said during the briefing.

China, the world's largest steel producer, adopted controls on crude steel output in 2021 after pledging to reach peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060.

Its output in 2022 fell by 1.7% year-on-year to 1.018 billion tonnes.

The consolidation in Chinese steel industry will accelerate in the coming three to five years and large firms would hold a 65% share of the domestic market within five years, up from 43% currently, Zou added.

With inputs from Reuters