Representational image. Reuters File
Analysts and industry executives predict that India’s steel demand would decrease in the next fiscal year, which begins in March, due to a massive general election that will postpone government projects and infrastructure expenditure.
Consistent government expenditure on infrastructure projects turned India, the world’s second-largest crude steel producer, into one of the alloy’s fastest-growing markets, even as global demand slowed.
Steel demand, however, is forecast to expand at a slower 7%-10% in the fiscal year 2024-25, compared to a projected 11%-12% growth in the current year to March 2024, according to experts and industry officials.
The incumbent Bharatiya Janata Party of Prime Minister Narendra Modi will seek a third term in the upcoming general elections in early 2024. For weeks, India’s general elections, the world’s largest democratic exercise, are held with staggered voting.
“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.
