Indian steel prices will face pressure in next fiscal year, 2025-26, as local mills grapple with imports from China and rising risks of aggressive tariff policies, Fitch Ratings said in a report on Thursday, March 20.
As a result, the rating agency has reduced headroom for ratings upgrades for India’s leading steel companies in terms of market capitalisation.
Currently, JSW Steel Limited is rated as “BB” with a stable outlook and Tata Steel Limited as “BBB-” with a negative outlook.
Fitch said that steelmakers in China have been grappling with generating profits as a prolonged property downturn has hit consumption, leading to higher exports to countries such as India.
As a result, Indian mills are facing a rising influx of discounted steel, with intake from China, South Korea and Japan touching an all-time high in the first 10 months of the ongoing fiscal year and with prices dropping to their lowest level in more than three years in August 2024, it said.
Meanwhile, US President Donald Trump's 25 percent tariffs on steel and aluminium imports triggered retaliation from the major trading partners of the US.
While the tariffs are expected to have a "minimal direct impact" on Indian companies, the redirection of steel imports from countries with higher exposure to the US into India could pressure domestic prices, the agency said.
Japan and South Korea account for 15 percent of total steel imports to the US, Fitch noted.
Fitch expects JSW Steel’s and Tata Steel's margins to improve in the coming year, helped by higher domestic demand, lower raw material costs and China's stimulus measures as it would limit imports into India, but said they will remain below average, despite the likelihood of the levy of a 12 percent safeguard duty.
The lower margins remain a risk for the companies' ratings, with Tata Steel at higher risk from the restructuring in its European operations and from mining taxes imposed by Indian states, the rating agency said.