ICRA projects that domestic steel industry capacity utilization will dip below 80pct in FY2025 for the first time in four years, as cheap imports continue to take market share. The credit rating agency warned that the planned capacity addition of 90-95 mln tons per annum, with investments of USD 45-50 bln, could face delays unless domestic steel mill earnings improve.
Girishkumar Kadam, Senior Vice President at ICRA, highlighted that the domestic steel industry achieved a record capacity addition of 18.2 mln tons per annum last fiscal, with another 15.3 mln tons per annum scheduled for this year. Despite this, the growth in domestic steel production is expected to slow to 5pct in FY2025, impacted by cheaper imports. Consequently, capacity utilization is forecast to drop from 85pct in FY2024 to 78pct in FY2025, the lowest level in four years.
ICRA noted that the domestic steel industry had maintained strong capacity utilization and investment levels post-Covid, but this trend is now at risk due to the surge in cheap imports. These imports are putting pressure on domestic profit margins, lowering capacity utilization, and increasing leverage levels to support expansion plans.
Steel producers have long raised concerns about cheap imports, particularly as trade flows shift towards high-growth markets like India. China accounted for 30pct of India’s steel imports in the first seven months of FY2025, with 59pct coming from countries with free trade agreements like Japan, South Korea, and Vietnam.
ICRA’s report also noted that domestic HRC prices have been trading at a premium to cheaper imports, adding further strain on domestic mills. By end-November 2024, domestic HRC prices were USD 12-16 per ton higher than the landed costs of imports from China and Japan, signaling that import pressures will likely persist unless international steel prices rise significantly.
ICRA forecasts that finished steel imports will make up 7-7.5pct of India’s domestic market share in FY2025, the highest level in six years. With export demand weak, net finished steel imports are expected to surge to levels last seen during the FY2016 steel downturn.
