India Steel Industry Outlook FY27 Remains Stable on Strong Domestic Demand: India Ratings and Research
“India’s steel demand outlook remains structurally positive, supported by infrastructure and manufacturing growth. The profitability of steel players is also supported by the government imposing safeguard duties. However, raw material price volatility, significant capacity expansion risks, lower import quota in the EU, and the impact of Carbon Border Adjustment Tax (CBAM) on EU exports are the key near- to medium-term monitorables.” Says Rohit Sadaka, Director-Large Corporates, Ind-Ra.
Domestic Demand and Capacity Expansion to Sustain Industry Growth: Ind-Ra expects India’s steel demand to grow at a high-single-digit percentage yoy in FY27 (FY26: 7.4%; FY25: 10.4%), driven by the government’s continued infrastructure spending, healthy demand from the construction, engineering, and automotive sectors, and a likely pickup in private corporate capex. The agency believes capacity additions across the industry will broadly keep pace with demand growth, preserving the domestic demand-supply balance and supporting volume growth. Despite the weak demand trends across several global markets, strong structural growth drivers will keep India among the fastest-growing steel markets globally.
Profitability to Improve, despite External Pressures: Ind-Ra expects profitability and cash flows to improve in FY27, supported by safeguard duties, easing import pressure, stabilising steel prices, and favourable raw-material costs. The agency believes India’s import-control measures have materially reduced the impact of China-led global oversupply, supporting domestic pricing and improving spreads, particularly in flat steel products. Steel imports declined 18% yoy in FY26 after the government enforced safeguard duties, stricter BIS norms, and anti-dumping measures. However, Ind-Ra continues to view raw-material price volatility, geopolitical disruptions, and evolving trade policies as key risks to the industry’s earnings performance.
Credit Profiles and Liquidity to Remain Comfortable, despite Elevated Capex: Ind-Ra believes the ongoing capacity expansion is unlikely to materially weaken the steel sector’s credit metrics, as most producers are pursuing growth with strong balance sheets after sustained deleveraging and healthy cash generation. The agency expects net leverage and interest coverage metrics to remain broadly stable through FY27-FY28, supported by healthy profitability, improving fixed-cost absorption, operating efficiencies, and calibrated capital allocation. While free cash flow is likely to remain negative due to expansionary capex and working-capital requirements are likely to increase as new capacities ramp up, Ind-Ra does not foresee significant liquidity pressure for large and mid-sized steel producers. Most major players have adequate refinancing flexibility, committed funding lines, and access to long-tenor debt structures, although lower-rated and non-integrated players could face greater pressure from competition, weaker conversion margins, and refinancing requirements.
Range Bound Raw-Material Costs to Support Earnings Visibility: Ind-Ra expects both iron ore and premium coking coal prices to remain largely range-bound in FY27. The agency believes adequate global and domestic iron ore supplies will offset rising demand from steel production growth, while subdued global steel demand should limit upward pressure on coking coal prices despite supply tightness in China and Australia. This stable raw-material environment is likely to support sector profitability, cash generation, and earnings visibility in FY27.
Structural Growth in Stainless Steel, despite Global Supply Risks: Ind-Ra expects India’s stainless-steel market volume to grow at a mid-single-digit percentage yoy in FY27, supported by greater adoption across railways, automobiles, household applications, utensils, and industrial end markets, where stainless steel continues to substitute conventional metals. Stainless-steel production increased 14% yoy to about 4.45 million tonnes in FY26, while exports rose 35% yoy from a low base. Although India remains a net importer of stainless steel, imports from China have moderated after the government’s tariff and non-tariff measures. Ind-Ra believes domestic demand will continue to support production growth; however, the sector remains exposed to global oversupply, scrap availability, import pricing dynamics, free-trade agreements, and evolving trade measures such as the CBAM and other import restrictions.
Decarbonisation and CBAM Key Long-Term Industry Themes: Ind-Ra believes sustainability considerations will increasingly influence competitiveness, investment decisions, and export opportunities across the steel value chain. Countries globally are increasing the share of steel produced through the lower-carbon electric arc furnace (EAF) technology, although China continues to rely predominantly on the blast-furnace route despite its carbon-reduction targets. Simultaneously, Ind-Ra believes EAF alone cannot deliver industry-wide decarbonisation due to limited scrap availability, necessitating significant investment in lowering emissions from the traditional blast furnace-basic oxygen furnace operations. Increasing the Scope 1, 2, and 3 emission disclosure requirements, along with the European Union’s CBAM, is likely to accelerate decarbonisation initiatives and make carbon efficiency a critical determinant of export competitiveness. Global steel emissions remain around 1.92 tonnes of CO2 per tonne of crude steel, with EAF-based production generating substantially lower emissions than blast-furnace-based production. Companies that proactively improve carbon efficiency and adopt lower-emission technologies are likely better positioned to preserve access to global markets over the long term.
Published on:
03 August 2026
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