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India Ratings and Research (Ind-Ra) in its latest report has said that the Indian steel sector outlook, on the back of strong domestic demand from government and private sectors, is likely to remain firm amid concern of global demand uncertainties in the current fiscal (FY23). It has maintained a '’neutral outlook’ on the steel sector for FY23 in view of high raw material inflation that would result in elevated prices and moderation of volume and margin.

Ind-Ra also expects that infrastructure spending by the government will support steady domestic consumption. It said the government has allocated Rs 111 trillion for the National Infrastructure Pipeline (NIP) to be spent over the next five years while for the private sector capital expenditure, housing and consumer durables end-user segment, the demand growth would remain muted due to elevated prices.

According to the report, steel players may find it challenging to pass on the cost inflation completely. Although this could moderate absolute EBITDA, it would remain higher than the pre-pandemic levels. Lower Chinese production and exports, and an increase in quota limit for exports to European markets, due to the ongoing Ukraine-Russia war, Indian steel players are likely to benefit. As such, the margin in exports sales mix is likely to be higher in FY23, cushioning the profitability.