India’s domestic steel consumption growth is likely to come down to 7-8 per cent in the next financial year against an estimated 12-13 per cent this fiscal due to moderate government spending during the election period, Icra said in a report on Thursday. Elevated input costs, import pressures, along with softer steel prices are expected to sequentially pull down the steel industry’s operating profit margins by 110-115 basis points in FY2025, the ratings agency said.
The domestic steel consumption could decelerate to 7-8 per cent in FY 2024-25 after three back-to-back years of double-digit growth, it said.
As per Icra, the demand in the ongoing 2023-24 fiscal is estimated to be in the range of 12-13 per cent while the growth of demand was 14.5 per cent in 2022-23 financial year, and 13.3 per cent in the preceding year.
Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings, Icra said, “In the six-month period between June and November of 2023, as the government accelerated infrastructure spending ahead of the union elections, domestic steel demand grew at a brisk pace of around 16 per cent over the same period of last fiscal.”
However, the prints for December 2023 and January 2024 reveal a marked slowdown in consumption growth.
While these are early trends, these numbers nonetheless hint at demand remaining soft over the next two quarters as the government spending moderates around the election period, he said.
On the cost side, coking coal, which Indian mills largely import, remains the largest cost component for a primary steel producer, accounting for 40-45 per cent of the overall cost, followed by iron ore at 10-15 per cent, Icra said.
