ICRA revised domestic steel consumption growth upward to 9-10% for FY25
Credit rating agency ICRA has revised its steel demand growth target for the full year 2024-25 (FY25) to 9-10 per cent, up 200 basis points from the earlier estimate of 7-8 per cent.
The growth forecast takes into account the latest industry trends. Domestic steel consumption registered a growth of 11.3 percent between February and April 2024. In its note on the steel sector, ICRA said that while government investment was healthy till February 2024, other steel-consuming sectors such as housing and real estate have contributed to resilient demand thereafter.
Girishkumar Kadam, senior vice president and group head, corporate sector ratings, ICRA said that the steel industry has witnessed the fastest growth period in the last three years since the global financial crisis.
“In FY2024, the sector recorded a consumption growth of 13.6 per cent, which is marginally lower than the peak of 13.9 per cent recorded in FY2006 during the golden period of Indian private sector investment,” he said.
Kadam also said that as demand remained healthy despite the ongoing elections, the rating agency revised up its baseline forecast for average steel prices for the year 2025 by 2 to 3 percent from previous estimates of February 2024. “This is expected to to an increase in profits. from $12-18/metric ton (MT) in the current fiscal,” he said.
The sector’s leverage (total debt to corporate earnings) was expected to remain at a comfortable level of 2.0 to 2.5 times in FY25, on the back of better realizations and higher deliveries. It would make the Indian steel industry resilient to cope with a deteriorating global demand environment.
However, subpar economic growth prospects in China and other leading global steel-producing and consuming hubs have shifted steel trade flows to fast-growing markets such as India, ICRA said.
India’s imports of finished steel have increased by 38.2 percent in FY2024, Kadam pointed out.
“In line with our expectations, India became a net steel importer last fiscal after a gap of five years. Given the weak global growth prospects for the coming quarters, we expect domestic steel imports to further increase by 13 to 14 percent in fiscal 2025, which will result in the country being a net steel importer in the current fiscal as well,” he said.
First print: June 3, 2024 | 2:22 PM IST