India’s rating agency ICRA has revised domestic steel demand growth up to 9-10 percent for the fiscal year 2023-24, from 7-8 percent previously, according to a sector report on Thursday, September 14.
The last time the industry witnessed such sustained high growth was before the 2008 global financial crisis, when strong private sector capex fueled domestic steel demand.
This time it is powered by the government’s infrastructure-oriented growth model, and domestic steel demand has been growing in double digits since 2021-22, and this momentum has continued in the current fiscal year as well, when demand registered a growth of 13 percent between April and August of this fiscal year.
The central government capital expenditure registered an impressive 59.1 percent year-on-year growth in the first quarter of 2023-24 which suggests an accelerated pace of infrastructure spending ahead of the 2024 national elections, the ICRA report said.
It said that 14.3 million mt per year of new steelmaking capacity is expected in the current fiscal year, making it the largest addition by the industry in a single year. The industry’s supply pipeline is expected to remain strong in the fiscal year 2024-25 as well, when an estimated 12.3 mt per year is lined up for commissioning.
Despite this burst of new supplies, the favorable domestic demand will adequately absorb them, helping improve the industry’s capacity utilization to 82 percent this fiscal year compared to capacity utilization of 80 percent in the previous fiscal year, the report said.
However, the industry faces multiple headwinds in the external environment, including a meltdown in the Chinese housing market, a key engine driving the country’s steel demand, and the prospect of sub-par economic growth in western economies, it added.