Steady government spending on infrastructure projects propelled India, the world’s second-biggest crude steel producer, into one of the fastest-growing markets for the alloy globally, even as world demand slackened.
But steel demand is expected to grow at a modest 7%-10% in the 2024-25 fiscal year, slower than a projected 11%-12% growth in the current year to March 2024, the analysts and industry executives said.
Prime Minister Narendra Modi’s ruling Bharatiya Janata Party will seek a third term in the next general elections due in early 2024. Staggered voting in India’s general elections, the world’s largest democratic exercise, takes place for weeks.
“We expect finished steel consumption in India to increase by 9% in FY25, following a 12% rise in FY24,” Fitch Ratings said.
But India would still remain the main growth market globally for steel, it said. Finished steel consumption hit a five-year high between April and October as construction activity picked up and the automobile sector showed robust demand. The construction sector grew 13.3% year-on-year in the July-September quarter and posted a 7.9% growth from the previous quarter to June 2023, the highest in five quarters.
The construction sector has been the main driver for India’s steel market, said Puneet Paliwal, an analyst at London-based CRU Group.
“This government capex-led steel demand growth is not expected to sustain in 2024,” Paliwal said, adding that this would be particularly true during the first half of next year because of an expected reduction in government spending.
India has also seen a steady rise in steel imports, with shipments touching a four-year high during April-October, government data showed.
While the steel industry has sought measures to curb imports, the government has said it would monitor the situation.
In addition to the rising imports, India’s steel mills are struggling with higher raw material costs, and industry officials say slower demand would exacerbate their problems.
