The Indian steel sector has enjoyed a multi-year demand surge which will continue in the current FY'24 but it is expected to moderate in the coming fiscal, global analytics company Crisil said.
The sector has witnessed double digit demand growth rate of 11 to 13 per cent during three consecutive years and is likely to moderate to 3 to 5 per cent in FY'25, Miren Lodha, Director Research, Crisil Market Intelligence and Analytics said on Friday.
"We are clearly in the midst of a demand supercycle," Lodha told PTI.
The moderation is likely in the long steel segment in FY'25 ahead of the general election.
The only other instance of such a demand surge in the last two decades was between 2006 to 2008, he said.
Lodha said the infrastructure sector, a key driver of the steel demand, is expected to maintain its momentum fuelled by ongoing government projects.
The infrastructure segment has been driving a lot of momentum in the steel demand and is expected to continue in the coming years. However, government schemes like the Pradhan Mantri Awas Yojana are nearing conclusion, which could slow down the demand momentum in the steel sector, he said.
Lodha said the recent surge in steel imports, which has been prompted by lower Chinese prices and strong Indian demand, has raised concern among the domestic manufacturers.
"The disparity between import and domestic prices has triggered significant imports," he elaborated. But it will self correct in the long run with the ongoing capacity addition.
"New steelmaking capacity of 12-13 million tonnes is expected to come online in the second half of fiscal 25, aligning production with demand and reducing import dependence," Lodha said.
Additionally, the potential demand improvement in China after the Lunar New Year coupled with expected production cuts, could further curb Chinese exports to India.
Overall the Indian steel sector's outlook remains positive, albeit with a projected dip in demand next year. The industry's focus will be on ramping up domestic production and tackling import concerns to maintain a robust long-term growth, he added.