The overall projection for domestic steel consumption looks stable after significant growth in Q1 demand. According to rating agency ICRA, domestic steel consumption may increase by 9-10 per cent in FY25. However, The current quarter may see some slowdown in steel consumption due to the seasonality issues associated with the monsoon. The capital expenditure by the government on steel consumption is also likely to pick up gradually.
Capacity Utilisation
The ICRA report suggests that the steel industry will witness almost 88 per cent of capacity utilization, making it the highest in a decade. The significant high in utilization comes after the addition of the all-time high capacity of 15.6 million tonnes per annum (mtpa).
Commenting on the industry trends, Girishkumar Kadam, Senior Vice-President & Group Head, of Corporate Sector Ratings, at ICRA said: “India’s finished steel imports increased by 35.4% in Q1 FY2025 and India remained a net finished steel importer in Q1 of FY2025, in line with the trend seen in FY2024. To curb imports, the Government of India initiated an anti-dumping investigation into steel imported from Vietnam, a key exporter of steel to India in recent years, accounting for almost 9% of India’s finished steel imports in FY2024.”
Consistent growth in Steel consumption
After an economic slowdown and financial crisis due to the Pandemic, the growth of the steel industry has been steady. The past three years for the steel industry have been fruitful due to witnessing the fastest period of growth. A 13.6 per cent consumption growth was registered in FY 2024. The growth stats in FY 2024 were marginally lower than 13.9 per cent in FY 2006, considered the golden period of Indian private sector capex.
Steel is a globally traded commodity that can affect the domestic steel industry, therefore international events play an important role in determining it. Due to slow economic growth in China and other leading nations in steel production and consumption, steel trade flows have been redirected to countries like India. The domestic steel imports have also risen domestically since 2023.
Indian Steelmakers Capacity
The capacity expansion by the Indian steel makers is going at a high pace, with 15.6 mtpa capacity addition alon in FY 2025. The capacity expansion has picked up speed after the pandemic, witnessing the addition of 26.3 mtpa between FY 2021 and FY 2024. The new 27.5 mtpa capacity is also expected to be added between FY 2025 and FY 2027. The high capacity expansion has been countered with a steady increase in demand, which is helping the industry in its utilization.
Kadam also mentioned that steel prices in the domestic market are under pressure since the middle of May 2024, due to the consistent import of steel. However, steel prices are expected to be stable due to the drop in raw material prices used in steel manufacturing.