Domestic Steel Consumption To Grow By 9-10% In FY25 Despite Surge In Imports: ICRA

New Delhi: India’s domestic steel consumption is projected to grow by 9-10 Percent in FY2025, according to a report by rating agency Icra. The strong demand, which saw a 15 Percent year-on-year (YoY) growth in the first quarter of FY2025, is expected to continue, though it may slow down in the current quarter due to the impact of the monsoon. Icra expects capacity utilization in the steel sector to reach a decade-high of around 88 Percent in FY2025, despite a record 15.6 million tonnes per annum (mtpa) of capacity being added during the year.

The report highlights that India’s steel industry has been on a rapid expansion spree, with 26.3 mtpa of new steel-making capacity added between FY2021 and FY2024. An additional 27.5 mtpa is expected to come online between FY2025 and FY2027. This surge in capacity comes amid growing demand and a rise in steel imports.

“India’s finished steel imports increased by 35.4 Percent in Q1 FY2025, continuing the trend from FY2024. India remained a net finished steel importer during this period,” said Girishkumar Kadam, Senior Vice-President and Group Head, Icra. To curb imports, the Indian government has launched an anti-dumping investigation into steel imports from Vietnam, which accounted for 9 Percent of India’s steel imports in FY2024.

Despite rising imports, steelmakers have benefited from a significant drop in raw material prices. Australian coking coal prices have fallen by 45 Percent from their January 2024 highs, while NMDC Limited has slashed iron ore prices by 18 Percent from peak levels seen in May-June 2024. These cost reductions are expected to support steel spreads, although there may be a temporary contraction in gross spreads by Rs 500-1,000 per metric tonne in Q2 FY2025, before they improve in Q3.

Icra’s report underscores the continued growth of India’s steel sector, despite external challenges such as competitively priced imports and global economic uncertainty, especially from China’s slower growth. The industry saw consumption growth of 13.6 Percent in FY2024, marking its fastest expansion since the global financial crisis.

With government capital expenditure expected to rise later this fiscal year, the domestic steel sector is positioned for continued growth, despite current pressures on prices and margins.