Tata Steel Limited will increase investment in China by 5% in 2012, as it seeks to maintain market share according to the company’s managing director.

Hemant Madhusudan Nerurkar told China Daily that the company will not make any major investments in its rolling mills, located in the cities of Wuxi in Jiangsu province and Xiaman in Fujian province, this year.

“But next year there will be some changes,” he said.

Currently, the company’s problem in China is overcapacity, which means production far exceeds real demand, said Nerurkar.

He added that capacity will gradually decline as the government encourages more energy efficiency in the industry.

Meanwhile, rising demand for more value-added products, such as coated steels, electrical steels, and products for the aviation industry will provide opportunities for the company, said Nerurkar.

He said the Chinese steel industry has developed very well in the last 10 years at an ‘admirable’ speed. He also expects the company’s business in China to grow at the same rate as the country’s steel consumption growth, by 5 to 7% increase year-on-year.

Currently revenue from China contributed no more than 3 to 4% to the company’s total revenue in the latest fiscal year, said Nerurkar.

Apart from local demand, Tata Steel also expects to export more products from its Chinese mills to Europe and Japan, both markets that require external supplies.

At present, the company is not considering entering into partnerships with Chinese steel players, said Nerurkar, although it has not ruled out the possibility of developing downstream partnerships at some point in the future.