India's steel industry capacity to increase by 20 mn tons between FY25-27: Acuite Ratings

Driven by strong growth in the automotive, real estate, and infrastructure sectors, India's steel demand is projected to grow by 8 per cent in the medium term.

India's steel industry is expected to see an increase in annual capacity by 20 million tons during the financial year (FY) 2025-27, according to a recent report by Acuite Ratings & Research. The report bodes well for the Indian steel industry in the medium to long term.

India's steel demand is set to grow by 8 per cent in the medium term, driven by strong growth in the automotive, real estate, and infrastructure sectors.

The report highlights that the steel industry will continue to see sustained capacity expansion over the medium to long term, despite the prevailing margin pressures.

Among the challenges faced by the domestic industry are a marked increase in imports from Asian countries such as Vietnam and China.

"Chinese exports of iron and steel products saw a 22 per cent YoY growth in the Apr-Sep'24 period. With slower domestic demand and large excess capacities in the sector, there is a rising risk of a surge of low-cost Chinese steel imports in the markets of Europe and Asia," said Suman Chowdhury, Chief Economist and Executive Director, Acuite Ratings & Research.

"Imports from countries like Vietnam are also reported to be rising. However, this has begun to lead to trade protection measures in India; higher tariffs on imports from China and Vietnam have been imposed in certain grades to support the domestic industry and help protect local manufacturing," he added.

According to the report, the steel industry's vulnerability to volatility in key raw material prices, such as coking coal and iron ore, will persist; moreover, higher environmental and regulatory costs will pose a challenge to maintaining cost efficiency going forward.

In FY2023-24, consumption rose by a sharp 3.6 per cent (YoY). According to the Ministry of Steel, India's per capita steel consumption has doubled, rising from 59 kg in 2013-14 to 119 kg in 2022-23.

During this period, crude steel production in India increased from 109.1 million tonnes (MT) in 2019-20 to 144.3 MT in 2023-24, reflecting a CAGR of 7.2 per cent.

The domestic steel industry's production capacity also expanded from 142.3 MTPA in 2019-20 to 179.5 MT in 2023-24, supporting the rise in production.

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