After witnessing three back-to-back years of double-digit growth in steel consumption, domestic steel consumption could decelerate to 7-8% in FY25, said rating agency ICRA.
The domestic steel consumption that had grown at 11.4% and 13.3% in FY22 and FY23 respectively has seen momentum continue in FY24. In first 10 months of FY24 the steel consumption is expected to have grown at a strong pace of 14.5% . ICRA expects the financial year to end on a strong note with steel consumption growing 12-13% year-on-year during FY24 to over 120 million tonne. The steel consumption is likely to rise crossing 140 million tonne mark in FY25. However year-on-year growth will thereby translate to 7-8% bucking the trend of the previous few years, when the industry experienced the fastest period of growth post the global financial crisis.
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% over the same period of last fiscal. However, the prints for December 2023 and January 2024 reveals a marked slowdown in the consumption growth to just 6.5%. 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.”
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The operating environment for steel manufacturers is also likely to remain challenging with raw material prices specially that of coal expected to witness volatility.
ICRA expects the challenges to the operating environment for domestic steel producers in the next fiscal to be posed by a period of softness in steel prices, elevated input costs, a temporary deceleration in domestic demand growth close to the Union Elections, and a weak external environment.
Steelmakers have been adding capacities at a brisk pace and post Covid,, between FY2021 and FY2023 around 15.3 million tonne per annum (mtpa) of steel manufacturing capacities have been commissioned . Another 38.5 mtpa of new steelmaking capacity is expected to come onstream between FY2024 and FY2027, as per ICRA.
This rapid pace of fresh capacity creation as per ICRA has been unparalleled in India. The industry is poised to witness an all-time high addition of 11 mtpa in the current fiscal and an even higher 15.6 mtpa in FY2025. However, such large capacity additions have been adequately counterbalanced with incremental demand, helping shore up the industry’s utilisation level to a decadal high of ~88% in FY2024 and an estimated 87% in FY2025, as per ICRA.
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Published: 08 Mar 2024, 11:53 AM IST