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.