India Ratings and Research (Ind-Ra) has maintained a neutral stance for the steel sector in the fiscal year 2025, foreseeing a year-on-year demand growth of 9%-12%. This projection is grounded on the sustained expansion in end-user industries such as automobiles and infrastructure. It follows a 13.8% surge in FY24 and an 8% compound annual growth rate over the past five years. Ind-Ra highlights that this demand growth is anticipated to closely mirror the gross fixed capital formation, which is expected to dip slightly to 8.5% year-on-year for FY25 from 10.2% in the preceding fiscal year.

Rohit Sadaka, Director & Head- Materials and Diversified Industrial, Ind-Ra, remarked, "We anticipate a balanced domestic demand-supply scenario, with demand growth aligning with capacity expansions across industry players. However, the persistent global oversupply situation may pose a significant import threat." He further predicts that raw material and finished goods prices will remain stable, given a moderate recovery in global demand. Domestic steelmakers are expected to maintain stable credit metrics, fuelled by heightened profitability and improved operating cash flows amidst debt-led capital expenditure.

Globally, steel demand is projected to remain steady, with China's transition to low-carbon initiatives and moderate demand from the European Union counterbalanced by growth in emerging economies like India. Ind-Ra also predicts that global steel prices will remain within a range in FY25. Despite global challenges and stricter enforcement of environmental regulations, Ind-Ra maintains a stable rating outlook for its rated entities in FY25, citing anticipated profitability improvements and a stable interest rate environment. The liquidity of large and mid-sized integrated steel players is forecasted to remain sufficient in FY25, supported by enhanced cash flow from operations in previous years, thereby fortifying their financial flexibility. This stability, combined with favourable working capital dynamics, is expected to facilitate debt-funded capital expenditures in FY25 and FY26, thus maintaining steady credit metrics. (Source: ET Energy)