ICRA projects 8% growth in steel demand, flat margins for mills in FY26

Credit rating agency ICRA in its latest report, has said that India’s steel demand is likely to remain healthy at 8 per cent in the current financial year (FY26). However, it warned that softer steel prices and incremental supply are likely to extend margin pressure for domestic steel mills. It highlighted that the operating margins of the domestic steel industry are expected to remain largely flat at around 12.5% for FY26, lower than the previous expectations of an improvement of 100-120 bps, reflecting continued weakness in steel prices.

According to the report, with muted earnings momentum, industry leverage, measured by total debt to operating profit before depreciation, interest, taxes and amortisation (TD/OPBDITA), is projected at 3.4 times in FY26 as against ICRA's August 2025 estimate of 3.1 times and 3.5 times reported in FY2025. It said domestic hot-rolled coil (HRC) prices, which had spiked to ₹52,850 per tonne in April 2025 following a 12% safeguard duty, corrected to around ₹46,000 per tonne in November 2025. Domestic HRC prices are currently trading below import parity, reflecting persistent supply-side pressures.

The report further said India’s finished steel imports have fallen sharply in the first seven months of the current fiscal (April-October 2025), with volumes contracting by about 33% year-on-year as compared to the same period last year. It said while export demand remains lacklustre, FY26 net finished imports (indicating finished steel imports less exports) are poised to decline on the back of reduced inbound shipments.

However, it noted that rising trade barriers in key consumption markets such as the US and EU could divert surplus global steel volumes towards high-growth markets like India. In this context, it said the continuation of the safeguard duty remains critical to prevent a surge in imports and protect domestic prices from external shocks.

Meanwhile steel companies like Tata Steel and JSW Steel were trading mixed on Thursday afternoon. The JSW Steel shares traded over 1% higher and Tata Steel Prices were trading in red. On the other hand, mining and mineral stocks like Hindustan Zinc and Vedanta continued to hit new record high levels as Vedanta demerger continued to attract investor interest.