In 2001, China won the bid to host the 2008 Olympics. Since then, in a race to spruce up the country for the international sports meet, the Chinese government has undertaken a huge infrastructure overhaul, which includes tripling the length of Beijing's highways and quadrupling its subway capacity. As a result, China has become one of the world's largest steel buyers, using up about 240 million tonnes of steel annually and importing 32-34 million tonnes from across the world.

Given India's proximity, its good port infrastructure and low-cost steel, the Chinese demand set off a boom in the Indian steel industry. Steel exports to China jumped from 20,000 tonnes in 2000 to 1.5 million tonnes in 2003. Though there's been a slowdown in exports to China since, growing domestic demand due to a strong economy and rising global prices have held steel production at an all time high. India's 2004-2005 production was 38 million tonnes