World Steel Dynamics has forecast that China will become a net exporter of steel by 2005.

According to the report, the total steel output was estimated to be 285 million tonne, while real consumption would be around 266 million tonne, clearly indicating that the country would have surplus steel.

Moosa Raza, president Indian Steel Alliance said that this would have an adverse effect on domestic steel producers.

Though, there was unlikely to be a direct impact as the producers were diversifying their export basket, there would be an indirect effect, which could bring down prices.

Raza said, effectively 200 million tonne was traded globally, out of which 50 per cent was traded between European countries and NAFTA. So, effectively 100 million tonne was traded and China accounted for 30 per cent, as it imported around 30 million tonne.

If the excess 30 million tonne was now pushed in the international market then India could face threat from cheap imports. "The effect will be significant and we will be greatly impacted," he said.

The cheap influx of imports could lead to a downward revision of prices in the domestic market.

The report also pointed out that given the short supply of iron ore and coking coal in 2004, the output of pig iron and steel would be constrained. "The strong output growth rate of recent years would weaken and be much less than the rise in production capacity," said the report.

Industry sources said, if China were to face such a coke shortage, then the chances of India's getting its raw material from China would also reduce.

The total steel production capacity of China would increase rapidly in the coming years.

It would increase 62 per cent in 2005 over 2002 and 99 per cent in 2010 over 2002.