Steel Sector To Grow At 8%; Capacity To Rise By 20 MT By FY27: Report

The annual capacity of India's steel industry will increase by 20 million tonne between the financial year (FY) 2025 to 2027, says Acuite Ratings and Research in its recent report. The report gives a positive outlook for the Indian steel industry in the medium to long term. Driven by strong growth in the automotive, real estate, and infrastructure sectors, India's steel demand is projected to grow by 8 per cent in the medium term.

The report observes that despite the prevailing margin pressures, the steel industry will witness sustained capacity expansion over the medium to long term. The challenges before the domestic industry include a noticeable increase in imports from Asian nations like Vietnam and China. The risks from imports have gone up due to China's excess capacity and sluggish demand. However, the new tariffs placed on specific steel imports will help to reduce these risks.

"Chinese exports of iron and steel products have seen a 22 per cent year-on-year (YoY) growth in the April to September 2024 period. Given the slower domestic demand and large excess capacities in the sector, there is an increased risk of a surge of low-cost Chinese steel imports in the markets of Europe and Asia," said Suman Chowdhury, Chief Economist and Executive Director, Acuite Ratings and Research.

He added, “Imports from nations like Vietnam are also reportedly on the rise. However, this has started to lead to trade protection measures in India; higher tariffs on imports from China and Vietnam have been imposed in certain grades to support domestic industry and help safeguard local manufacturing.”

Chowdhury said that the steel industry will continue to be vulnerable to volatility in key raw material prices such as coking coal and iron ore; going ahead, higher environmental and regulatory costs will also be a challenge to maintain cost efficiency. In FY2023-24, consumption increased by a sharp 3.6 per cent (YoY).

The Ministry of Steel data shows that India's per capita steel consumption has doubled, from 59 kilogram (kg) in 2013-14 to 119 kg in 2022-23. Crude steel production in India increased from 109.1 million tonne (MT) in 2019-20 to 144.3 MT in 2023-24, reflecting a CAGR of 7.2 per cent. During this period, the domestic steel industry's production capacity also expanded from 142.3 MTPA in 2019-20 to 179.5 MT in 2023-24, supporting the rise in production. (ANI)