India's domestic steel capacity utilisation is projected to fall to 78% in FY2025, marking the lowest level in four years, according to a report by Icra. This decline follows three consecutive years of utilisation rates above 80%, as the domestic market faces increasing pressure from cheaper imports. Finished steel imports are expected to account for 7.0–7.5% of the domestic market share in FY2025, the highest level in six years. This surge has been driven by duty-free imports from Free Trade Agreement (FTA) countries like Japan, South Korea, and Vietnam, which together comprised 59% of total imports in the first seven months of FY2025. China remains a key contributor, making up 30% of total imports. The domestic steel industry added a record 18.2 million tonnes per annum (mtpa) of capacity in the last fiscal year, with another 15.3 mtpa expected in FY2025. However, domestic finished steel production is projected to grow by only 5%, lagging behind the 10–11% growth in domestic steel demand. Domestic hot-rolled coil (HRC) prices, which typically trade at a premium of $12–16 per metric tonne over imports from China and Japan, are expected to average 10% lower year-on-year, hitting their lowest levels since FY2021. Despite falling input costs, including a 24% year-on-year drop in coking coal prices to $218 per metric tonne, industry operating profits per tonne are expected to shrink to $110–115 in FY2025 from $127 in FY2024. The industry’s financial health is under scrutiny, with domestic bank debt per tonne rising by 17% to $192 in September 2024. Plans to add 90–95 mtpa of capacity by FY2031, requiring $45–50 billion in investments, raise concerns about leverage, particularly without a significant improvement in earnings. Girishkumar Kadam, Senior Vice-President at Icra, highlighted the risks, stating, “Sustaining large-scale investments could lead to a spike in leverage, exposing the sector to external macroeconomic shocks.” Government capital expenditure in the latter half of FY2025 could provide some relief by driving infrastructure-related steel demand. However, the rise in net finished steel imports continues to challenge the domestic mills' market position.