India Ratings Maintains Neutral Outlook for Steel Sector in FY26
India Ratings and Research (Ind-Ra) has maintained a neutral outlook for the steel sector for FY26. It expects the domestic steel demand to grow in the range of 9%-11% yoy in the fiscal, in line with its FY25 estimates; demand growth was around 10% yoy during 9MFY25 and 12.4% yoy in FY24. The demand growth is likely to be supported by the government’s continued spending on infrastructure projects such as roads, railways and ports along with expected stable growth in the end-user industries.
“We expect the domestic demand-supply scenario to remain balanced in FY26, with growth in demand to match with capacity additions across players, though the global oversupply situation is expected to keep the import threat high. In FY26, the profitability of steel players is likely to be range bound, on account of subdued realisations amid the threat of low-cost imports but supported by benign raw material prices. However, domestic players have become increasingly resilient to low-cost imports from the levels seen during 2015-2016 owing to low leverage on the balance sheet and improved cost efficiency. Hence, the credit metrics are likely to remain stable, due to the sustained profitability and steady operating cash flows amid debt-led capex,” says Rohit Sadaka, Director and Head, Materials and Diversified Industrials, Ind-Ra.
The agency expects the global demand-supply imbalance to persist on back of a modest demand recovery in some countries, supported by the pent-up demand and easing of financing conditions. Furthermore, the imposition of duties and tariffs by many countries on the import of steel will have a persistent threat of high volume of imports into India where demand growth is relatively high. This could lead to reorganisation of supply chain and keep the prices under check.
India’s steel industry is facing headwinds amid the threat of low-cost imports, keeping realisations subdued. Profitability is likely to remain rangebound in FY26, supported by benign raw material prices. The government has initiated a safeguard duty investigation on certain steel products to protect domestic players from low-cost imports. However, if safeguard duties are implemented, they could provide tailwind to the prices.
