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According to the Credit rating agency ICRA it has updated its 2024-25 (FY25) full-year steel demand growth target to 9-10%, 200 basis points higher compared to the earlier estimate of 7-8%.
The growth projection factors in the latest trends in the sector. Domestic steel consumption recorded 11.3% of growth during February to April 2024. In steel industry, ICRA stated that while government capex spending was healthy until February 2024, other steel consuming sectors like housing/real estate contributed to the resilient demand thereafter.
Girishkumar Kadam, senior vice-president and group head, corporate sector ratings, ICRA mentioned, for the last three years, the steel industry has been going through the fastest period of growth witnessed since the global financial crisis.
“In FY2024, the industry registered a consumption growth of 13.6%, which is marginally lower than the peak of 13.9% registered in FY2006 during the golden period of India’s private sector capex,” he said.
Kadam also said that with demand remaining healthy despite the ongoing elections, the rating agency was revising its baseline FY2025 average steel prices forecast upwards by 2-3% over previous estimates made in February 2024. “This is expected to lead to an earnings uplift of $12-18/metric tonne (MT) in the current fiscal,” he said.
The industry’s leverage (total debt to operating profits) was expected to remain at a comfortable level of 2.0-2.5 times in FY2025, on the back of better realisations and higher deliveries. It would make the Indian steel industry resilient to withstand a worsening global demand environment.
However, a sub-par economic growth outlook in China along with other leading global steel-producing and consuming hubs have redirected steel trade flows to high-growth markets like India, ICRA noted. India’s finished steel imports increased by 38.2% in FY2024, Kadam pointed out.
“In line with our expectations, India turned into a net steel importer last fiscal after a gap of five years. Given the weak global growth outlook over the next few quarters, we expect domestic steel imports to rise further by 13-14% in FY2025, leading to the country being a net steel importer in the current fiscal as well,” he said.
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