India Steel Outlook Challenging

ICRA Limited, a rating agency, has released a report forecasting that India's domestic steel demand will grow by approximately 8% in FY2026. However, the operating environment for steel producers is expected to remain challenging due to subdued steel prices, stable but sticky input costs, and an unfavorable global environment. ICRA Limited projects industry operating margins to remain flat at around 12.5% in FY2026, lower than earlier expectations. Industry leverage is also projected to rise. The domestic steel industry has seen significant capacity additions, creating a temporary surplus and putting pressure on prices. Hot rolled coil (HRC) prices, despite a safeguard duty, have declined. Globally, structural challenges in the China economy have led to a surge in China's steel exports, impacting global prices. ICRA Limited emphasizes the critical need for the continuation of safeguard duties in India to protect domestic prices from external shocks, especially as rising trade barriers in the United States and the European Union could divert surplus global steel to India. Domestic steel mills are planning substantial capacity additions by FY2031, but ICRA Limited cautions that these investments could lead to higher leverage if earnings do not improve significantly.