Icra revises growth estimates for domestic steel sector to 10 per cent

Rating agency Icra on Wednesday revised upwards its growth estimate for the domestic steel industry to 9-10 per cent this fiscal, on account of the robust government capital expenditure. It had estimated the steel industry to grow in the range of 7-8 per cent at the start of the current 2023-24 fiscal, the rating agency said in a statement.

“Icra has revised the FY2024 domestic steel demand growth forecast upwards to 9-10 per cent now, from 7-8 per cent made at the start of the current fiscal, on the back of strong government capital expenditure,” the statement said.

Powered by the government’s infrastructure-oriented growth model, the domestic steel demand has been growing in double digits since FY2022, and the momentum has continued in the current fiscal as well.

Steel demand registered a growth of 13.1 per cent between April and August this fiscal.
Jayanta Roy, Senior Vice-President and Group Head of Corporate Sector Ratings, Icra said: “Around 14.3 million tonne per annum (MTPA) of new steelmaking capacity is expected to come on stream in the current fiscal. This will be the largest capacity addition made by the industry in a single year in the recent past. The industry’s supply pipeline is expected to remain strong in FY2025 as well when an estimated 12.3 MTPA of capacities are lined up for commissioning.”While the operating environment remains supportive on the domestic front, the industry, however, faces multiple headwinds in the external environment, Icra noted. These include a meltdown of the Chinese housing market, a key engine driving the country’s steel demand, and the prospects of subpar economic growth in Western economies.

Consequently, in the current fiscal, on the one hand, while export opportunities remained weak for domestic mills, on the other hand, steel imports began to rise as global steel trade flows were diverted to high-growth markets like India, it said.