Steel Industry Faces Price Pressure Amid Rising Demand

The Indian steel sector anticipates an 8% growth in demand by FY26, despite falling steel prices keeping profit margins tight, according to ICRA. The report highlights structural headwinds in China impacting global prices. Challenges remain for industry expansion, and green steel's rise is limited by high hydrogen costs.

The domestic steel demand in India is predicted to grow by around 8% in FY26, yet lower steel prices are expected to keep producer margins under pressure, according to a report by rating agency ICRA released on Wednesday.

The report projects the industry's operating margin to remain steady at approximately 12.5% in FY26, countering prior hopes for an improvement. Incremental supply has led to a temporary surplus, maintaining pressure on steel prices, states Girishkumar Kadam, Senior Vice-President at ICRA.

Factors such as China's record-high steel exports of 88 million tonnes have affected global prices. India's steel imports plummeted by 33% year-on-year. The report warns that current industry expansion plans could inflate leverage unless earnings significantly rise. Green steel remains pricey until hydrogen costs decline.

(With inputs from agencies.)