New Delhi [India], December 12 : Capacity utilisation of domestic steel industry in 2024-25 is poised to slip below 80 per cent for the first time in four years as cheap imports nibble at market share, according to rating agency ICRA.
Fresh upcoming capacity addition plans could be at risk of a slowdown unless earnings of domestic steel mills inch up from prevailing levels, the rating said in a statement Thursday.
Following the post-Covid metals rally, the domestic steel industry was able to achieve the impossible trinity of maintaining above 80 per cent capacity utilisation rates, a strong investment pipeline, and comfortable leverage levels for three years back-to-back between 2021-22 and 2023-24.
However, according to ICRA's latest note on the steel sector, this trinity is unlikely to sustain going forward as the recent surge in cheap imports have nibbled at the market share of domestic steel companies.
"Coupled with the record ongoing expansion plans, the industry's capacity utilisation rates are expected to slip from 85 per cent in 2023-24 to an estimated 78 per cent in the current fiscal, the lowest we have seen in the last four years," said Girishkumar Kadam, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA.
Since steel is a globally-traded commodity, the external environment plays a crucial role in determining the health of the domestic industry.
Given the sub-par economic growth outlook in China, along with other leading global steel-producing and consuming hubs, steel trade flows have been redirected to high-growth markets like India, ICRA asserted.
At present, apart from the 7.5 per cent basic customs duty, most of the earlier tariff protection measures implemented during the 2015-2016 metals meltdown, like anti-dumping duty, safeguard duty, and minimum import price, have expired, giving overseas suppliers easier access to the domestic market.
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