India’s steel industry to grow at 8%; Capacity to increase by 20 million tonnes by FY 2027: Report

India’s steel industry will increase its annual capacity by 20 million tonnes between financial year (FY) 2025-27, Aquite Ratings and Research has said in its recent report. The report suggests a positive outlook for the Indian steel industry in the medium to long term.

India’s steel demand is projected to grow 8 percent in the medium term, driven by strong growth in the automotive, real estate and infrastructure sectors.

The report said that despite the current margin pressure, the steel industry will witness continued capacity expansion in the medium to long term.

Challenges faced by the domestic industry include significant increase in imports from Asian countries like Vietnam and China.

The risk from imports has increased due to China’s excess capacity and sluggish demand. However, new tariffs imposed on specific steel imports will help mitigate these risks.

“Chinese exports of iron and steel products have witnessed a growth of 22 per cent year-on-year in the April-September 24 period. “Given slow domestic demand and large spare capacities in the region, the risk of an increase in low-cost Chinese steel imports into the markets of Europe and Asia increases,” said Suman Chaudhary, chief economist and executive director, Acuity Ratings & Co. Research.

“Imports from countries like Vietnam are also reportedly increasing,” he/she said. However, this has led to the promotion of trade protection measures in India; Higher tariffs have been imposed on imports from China and Vietnam on some grades to support domestic industry and help protect local manufacturing.

Chaudhary said the steel industry will remain sensitive to volatility in prices of key raw materials such as coking coal and iron ore; Going forward, higher environmental and regulatory costs will also be a challenge to maintain cost efficiency.

In FY2023-24, consumption is expected to grow at a sharp 3.6 per cent (YoY). Steel Ministry data shows India’s per capita steel consumption has doubled, from 59 kg in 2013-14 to 119 kg in 2022-23.

Crude steel production in India to increase from 109.1 million tonnes (MT) in 2019-20 to 144.3 MT in 2023-24, showing a CAGR of 7.2 per cent.

During this period, the production capacity of the domestic steel industry also increased from 142.3 MTPA in 2019-20 to 179.5 MTPA in 2023-24, supporting growth in production.