+
ICRA Flags Margin Pressure Despite Steel Demand Growth
Steel

ICRA Flags Margin Pressure Despite Steel Demand Growth

Domestic steel demand in India is expected to grow by around 8 per cent in FY26, although softer steel prices are likely to keep profitability under pressure for producers, according to ICRA.

In a recent report, the rating agency projected the industry’s operating margin to remain largely flat at about 12.5 per cent in FY26, lower than its earlier expectation of an improvement. It noted that while demand growth remains healthy, incremental capacity additions have created a temporary surplus, resulting in continued pressure on steel prices.

“Although steel demand growth is projected at 8 per cent for FY26, additional supply has led to a near-term surplus, weighing on prices,” said Girishkumar Kadam, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA.

Domestic hot-rolled coil (HRC) prices, which had risen to Rs 52,850 per tonne in April 2025 following the imposition of a safeguard duty, corrected to around Rs 46,000 per tonne in November and are currently trading below import parity. At a global level, structural headwinds in China have pushed its steel exports to an all-time high of 88 million tonnes in the first nine months of calendar year 2025, further weighing on international prices.

Chinese HRC export prices averaged about USD 465 per tonne during the first seven months of FY26, compared with USD 496 per tonne in the corresponding period a year earlier. While India’s finished steel imports have declined sharply by around 33 per cent year-on-year in the current financial year, ICRA stressed that the continuation of the safeguard duty remains critical to prevent a resurgence in imports.

Under its base-case scenario, the agency expects domestic HRC prices to average around Rs 50,500 per tonne in FY26. Operating profit per tonne of steel production is estimated at USD 108, marginally lower than the USD 110 per tonne recorded in FY25. The overall sector outlook has been maintained at ‘Stable’.

ICRA also highlighted execution and balance-sheet risks linked to the industry’s large capacity expansion plans. Domestic steel producers are targeting capacity additions of 80–85 million tonnes over FY26–31, involving investments of USD 45–50 billion. However, the agency cautioned that unless earnings improve meaningfully, such large-scale investments could lead to a sharp rise in industry leverage over the medium term.

On green steel, Kadam said its share in India’s total steel demand is expected to rise from about 2 per cent, or roughly 4 million tonnes, in FY30 to nearly 40 per cent, or around 150 million tonnes, by FY50. However, he added that the economics remain challenging, with widespread adoption unlikely until green hydrogen prices decline to around USD 1.5–1.6 per kg, a level not expected in the near to medium term.

Domestic steel demand in India is expected to grow by around 8 per cent in FY26, although softer steel prices are likely to keep profitability under pressure for producers, according to ICRA. In a recent report, the rating agency projected the industry’s operating margin to remain largely flat at about 12.5 per cent in FY26, lower than its earlier expectation of an improvement. It noted that while demand growth remains healthy, incremental capacity additions have created a temporary surplus, resulting in continued pressure on steel prices. “Although steel demand growth is projected at 8 per cent for FY26, additional supply has led to a near-term surplus, weighing on prices,” said Girishkumar Kadam, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA. Domestic hot-rolled coil (HRC) prices, which had risen to Rs 52,850 per tonne in April 2025 following the imposition of a safeguard duty, corrected to around Rs 46,000 per tonne in November and are currently trading below import parity. At a global level, structural headwinds in China have pushed its steel exports to an all-time high of 88 million tonnes in the first nine months of calendar year 2025, further weighing on international prices. Chinese HRC export prices averaged about USD 465 per tonne during the first seven months of FY26, compared with USD 496 per tonne in the corresponding period a year earlier. While India’s finished steel imports have declined sharply by around 33 per cent year-on-year in the current financial year, ICRA stressed that the continuation of the safeguard duty remains critical to prevent a resurgence in imports. Under its base-case scenario, the agency expects domestic HRC prices to average around Rs 50,500 per tonne in FY26. Operating profit per tonne of steel production is estimated at USD 108, marginally lower than the USD 110 per tonne recorded in FY25. The overall sector outlook has been maintained at ‘Stable’. ICRA also highlighted execution and balance-sheet risks linked to the industry’s large capacity expansion plans. Domestic steel producers are targeting capacity additions of 80–85 million tonnes over FY26–31, involving investments of USD 45–50 billion. However, the agency cautioned that unless earnings improve meaningfully, such large-scale investments could lead to a sharp rise in industry leverage over the medium term. On green steel, Kadam said its share in India’s total steel demand is expected to rise from about 2 per cent, or roughly 4 million tonnes, in FY30 to nearly 40 per cent, or around 150 million tonnes, by FY50. However, he added that the economics remain challenging, with widespread adoption unlikely until green hydrogen prices decline to around USD 1.5–1.6 per kg, a level not expected in the near to medium term.

Related Stories

Gold Stories

Next Story
Products

Interio by Godrej launches modular workplace solutions

Interio by Godrej has launched Workscapes, a modular workplace solutions category designed to help organisations configure and adapt workspaces to changing requirements. The portfolio combines mobile and compatible furniture and support elements that can be rearranged across different work modes without changes to fixed layouts.Workscapes includes Collaboration Tables, Privacy Solutions, Mobile Markerboards and Space Dividers, Power Solutions, Storage and Support Elements, Meeting and Presentation Tools, and Seating Elements. The range is designed for focused work, collaboration, informal disc..

Next Story
Infrastructure Urban

CAFE-III Gives Auto Industry Investment Clarity

The government’s new Corporate Average Fuel Economy (CAFE-III) norms have provided the automobile industry with a clearer framework for technology investments, according to industry representatives. The framework seeks to balance environmental objectives with flexibility for manufacturers while encouraging the adoption of flex-fuel vehicles and biofuels. Society of Indian Automobile Manufacturers (SIAM) President Shenu Agarwal said the five-year framework would give automakers greater predictability to plan investments and accelerate innovation. He said the regulation established annual targ..

Next Story
Infrastructure Energy

Mines Ministry to Auction Two Offshore Mineral Blocks in Andaman Sea

The Ministry of Mines will launch an auction of two offshore mineral blocks in the Andaman Sea on Thursday, seeking to unlock India’s offshore mineral potential and strengthen long-term mineral resource security. The blocks will be offered under a composite licence, which permits exploration and development activities in accordance with the applicable regulatory framework. The ministry said the auction was intended to encourage systematic exploration, attract investment and promote the use of advanced technologies for offshore mineral exploration and development. The initiative is also aimed..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

SPECIAL OFFER
QR Code