India Ratings and Research predicts a 9%-11% growth in domestic steel demand for FY26, consistent with FY25 estimates. This growth is expected to be supported by government spending on infrastructure projects and stable end-user industries.
Ind-Ra predicts a balanced domestic demand-supply scenario in FY26, with growth in demand matching capacity additions. However, the global oversupply situation will keep import threats high.
Steel players’ profitability is expected to be rangebound due to subdued realisations and benign raw material prices. Domestic players have become more resilient to low-cost imports due to low leverage and improved cost efficiency. The global demand-supply imbalance will persist due to modest demand recovery in some countries and the imposition of duties and tariffs on steel imports.
India Ratings & Research (Ind-Ra) has maintained a neutral outlook for the Indian steel sector in FY26, citing stable demand, moderate pricing trends, and sustained government infrastructure spending. While the sector continues to benefit from domestic consumption and policy support, challenges such as global economic uncertainties and raw material price fluctuations remain key concerns.
Key Factors Influencing the Outlook
Ind-Ra’s decision to maintain a neutral stance on the steel sector is based on several critical factors:
1. Stable Domestic Demand
- The Indian steel industry is expected to witness steady demand growth, driven by ongoing government-led infrastructure projects, urban development, and industrial expansion.
- Sectors such as construction, automobiles, and capital goods will continue to be major consumers of steel.
2. Moderate Pricing Trends
- Steel prices are expected to remain stable to slightly volatile in FY26 due to global economic conditions and raw material price trends.
- The impact of international trade policies, including tariffs and export duties, could influence pricing in both domestic and export markets.
3. Raw Material Cost Fluctuations
- The availability and pricing of key raw materials such as iron ore and coking coal will play a crucial role in determining profitability.
- Any disruptions in supply chains or international market volatility may affect margins for steel manufacturers.
4. Government Policies and Investments
- The Production-Linked Incentive (PLI) scheme for specialty steel and infrastructure investments under the National Infrastructure Pipeline (NIP) will provide long-term support.
- Ongoing investments in railway, road, and housing sectors will sustain domestic steel demand.
- Competition from Imports: Increased steel imports, particularly from China and other Asian countries, could pressure domestic prices.
- Carbon Emission Regulations: Stricter environmental norms and the shift towards green steel production will require additional investments by manufacturers.
- Geopolitical Uncertainty: Any disruptions in global trade routes or commodity supply chains could impact raw material procurement and steel pricing.
Growth Opportunities and Future Prospects
Despite challenges, the Indian steel sector has multiple growth opportunities:
- Expansion of Domestic Production: Leading steelmakers, including Tata Steel, JSW Steel, and SAIL, are increasing production capacity to meet rising demand.
- Export Market Potential: Indian steel exports could benefit from supply disruptions in other markets and increased demand for high-quality steel products.
With stable demand, supportive government policies, and controlled pricing trends, the Indian steel sector is set for a balanced performance in FY26. However, challenges like raw material price volatility, global economic conditions.
increased imports will require close monitoring. Industry players will need to focus on cost optimization, innovation, and sustainability to navigate uncertainties and capitalize on emerging opportunities. As a result, India Ratings & Research’s neutral outlook for FY26 reflects a cautiously optimistic stance on the sector’s overall performance.
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