Credit rating agency ICRA has recently revised its forecast for steel demand growth in the current fiscal year, increasing its estimate to 9-10%. This upward revision reflects the strong performance of the sector in recent months, with domestic steel consumption registering a growth of 11.3% between February and April 2024. According to ICRA, the steel industry has experienced its fastest growth in three years, driven by robust government capital expenditure and strong demand from other sectors such as housing and real estate.
The agency’s report highlights that the steel industry has seen significant growth in recent years, with a consumption growth of 13.6% in the previous fiscal year. This is slightly lower than the peak of 13.9% recorded in FY06, which was during India’s private sector capital expenditure boom. Despite ongoing elections, demand remains strong, leading ICRA to revise its baseline forecast for average steel prices upwards by 2-3%. This is expected to result in an earnings uplift of $12-18 per metric tonne for the current fiscal year.
The agency’s report also notes that the Indian steel industry’s leverage is expected to remain at a comfortable level of 2.0-2.5 times in the current fiscal year, supported by better realizations and higher deliveries. This makes the industry resilient to a potential global demand slowdown. However, India’s dependence on imports is expected to continue, with finished steel imports increasing by 13-14% in the current fiscal year and maintaining India’s status as a net steel importer.
