India’s steel consumption is projected to increase by 7% year-on-year to 175.8 million tonnes in FY27. However, further price increases may be limited as domestic steel prices approach the safeguard-duty threshold and the possibility of higher imports grows, according to a report by Equirus Securities.
The brokerage expects steel demand to remain firm, supported by activity across key sectors. At the same time, an improvement in domestic production during the second half of the financial year could ease supply constraints and reduce the scope for further price gains.
The report estimates that steel consumption will grow by 6.5% year-on-year in the second half of FY27.
Steel Production Trails Consumption Growth
India’s crude steel production increased by 2.9% year-on-year to 85.1 million tonnes in the first half of FY27. In comparison, steel consumption rose by 7.5% to 84.9 million tonnes during the same period.
Demand remained strong in the second quarter, when consumption increased by 6.6% year-on-year to 43.4 million tonnes.
According to Equirus Securities, limited domestic supply contributed to steel price increases in August and September. However, planned capacity additions are expected to support production in the second half of the financial year, potentially easing supply pressures.
Automotive and Infrastructure Sectors Support Demand
The report identified activity in the automotive and infrastructure sectors, along with demand from emerging applications, as key contributors to steel consumption growth.
Government expenditure, GST cuts and continued private capital investment are also supporting demand, according to the brokerage.
On the supply side, production constraints at Rashtriya Ispat Nigam Limited (RINL) and secondary steel manufacturers reduced availability and contributed to higher prices. Equirus attributed weaker output among secondary producers to elevated raw material costs, operational disruptions, increased working capital requirements and limited coal availability.
Safeguard-Duty Threshold and Rising Imports May Limit Prices
Equirus Securities cautioned that domestic steel prices are nearing the safeguard-duty threshold of USD 675 per tonne. Prices moving beyond this level would mean the protection no longer applies, potentially affecting the competitiveness of domestic steel against imports.
The brokerage also highlighted the growing price gap between India and China as a factor that could encourage additional imports and restrict further domestic price increases.
India’s steel imports rose by 23.8% year-on-year to 4.1 million tonnes in the first half of FY27. Exports also increased by 26.2% to 3.5 million tonnes during the period.
Despite the rise in exports, India remained a net importer of finished steel, with net imports of 0.6 million tonnes in the first half. The gap narrowed to approximately 0.1 million tonnes in the second quarter.
Steel Sector Outlook: Focus Shifts to Production and Earnings
According to the report, the performance of the steel sector will increasingly depend on production growth and individual companies’ earnings rather than continued increases in steel prices.
Equirus Securities said it favoured investment opportunities supported by attractive valuations and earnings growth driven by capacity expansion. With further price gains likely to face constraints, production improvements and company-specific performance are expected to play a more important role in shaping the sector’s outlook.
Disclaimer: This article is intended for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any security. The projections and sector outlook discussed are based on the cited brokerage report and may change as market conditions evolve. Readers should conduct their own research or consult a qualified financial adviser before making investment decisions.
Source: ANI