India's Steel Demand Outlook for FY27
India's steel industry is expected to remain among the world's fastest-growing markets in FY27 despite global oversupply, geopolitical uncertainties and evolving trade barriers, according to India Ratings and Research (Ind-Ra).
The ratings agency has maintained a neutral outlook on the sector for FY27, citing strong domestic demand, supportive trade measures, stable raw material costs and disciplined capacity expansion as key factors underpinning profitability, cash flows and credit profiles.
Ind-Ra expects domestic steel demand to grow at a high single-digit rate in FY27, following growth of 7.4% in FY26 and 10.4% in FY25. The demand is expected to be driven by continued government infrastructure spending, healthy activity across construction, engineering and automotive sectors, and a gradual recovery in private capital expenditure.
The agency said planned capacity additions are likely to broadly match demand growth, helping maintain a balanced domestic supply-demand environment while supporting production volumes. It added that India's structural demand drivers are expected to keep it among the fastest-growing steel markets globally, even as demand weakens across several international markets.
Safeguard Duties Boost Steel Profitability
Ind-Ra also expects profitability and cash flows to improve during FY27, supported by safeguard duties, easing import pressures, relatively stable steel prices and favourable raw material costs. The agency noted that recent import-control measures, including safeguard duties, stricter BIS norms and anti-dumping actions, have reduced the impact of China-led global oversupply on domestic producers.
Steel imports declined 18% year-on-year in FY26, helping support domestic pricing, particularly in the flat steel segment. However, Ind-Ra cautioned that raw material price volatility, geopolitical developments and changing global trade policies remain key risks to earnings.
Credit Profile And Capex Outlook For Steel Firms
The agency expects credit metrics across the sector to remain stable despite elevated capital expenditure, as most large producers continue to expand capacity from relatively stronger balance sheets following sustained deleveraging and improved cash generation.
While free cash flow is likely to remain under pressure due to ongoing expansion projects and higher working capital requirements, Ind-Ra does not anticipate significant liquidity challenges for large and mid-sized steel companies. However, lower-rated and non-integrated producers could face pressure from weaker conversion margins and refinancing needs.
Raw Material Prices And Stainless Steel Growth
On raw materials, the agency expects both iron ore and premium coking coal prices to remain largely range-bound during FY27, supported by adequate supply and subdued global steel demand. Stable input costs are expected to provide greater earnings visibility for domestic producers.
Ind-Ra also projected mid-single-digit growth in India's stainless steel market in FY27, supported by rising adoption across railways, automobiles, household applications and industrial sectors. Stainless steel production rose 14% year-on-year to around 4.45 million tonnes in FY26, while exports increased 35% from a low base.
CBAM And Expert View On Steel Sector Risks
The agency added that decarbonisation and evolving environmental regulations, including the European Union's Carbon Border Adjustment Mechanism (CBAM), will become increasingly important for the industry's long-term competitiveness. Investments in lower-emission production technologies and improved carbon efficiency are expected to play a larger role in sustaining export opportunities over the coming years.
"India's steel demand outlook remains structurally positive, supported by infrastructure and manufacturing growth. The profitability of steel players is also supported by the government imposing safeguard duties. However, raw material price volatility, significant capacity expansion risks, lower import quota in the EU, and the impact of Carbon Border Adjustment Tax (CBAM) on EU exports are the key near- to medium-term monitorables," said Rohit Sadaka, Director – Large Corporates, India Ratings and Research.