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Rating agency ICRA in its latest report has said that the ongoing conflict between Ukraine and Russia will burden domestic steelmakers with high input costs. However, the tension between the countries provides exports opportunities to the Indian steel players. It noted that sanctions on Russia could open new export opportunities for Indian steel mills in geographies like Europe, the Middle East and the USA, which could face supply shortages in the near term.

According to the report, notwithstanding the input cost pressures, the industry earnings are expected to remain healthy in the next 12 months and its outlook for the industry remains positive. It said the domestic steel demand is also pegged to grow at 7-8 per cent in FY23 on the back of an estimated growth of 11-12 per cent in FY2022, supported by the government's large infrastructure spending plans.

It further said after reporting a steep 65-70 per cent sequential increase in the cost of coking coal in Q3 FY22, a further increase of 15 per cent Q-o-Q (quarter-on-quarter) is expected in the fourth quarter. Though the price of iron ore has moderated somewhat from the highs of Q3, and domestic mills have announced some steel price hikes from late January 2022, these will not be able to entirely compensate for the steep rise in coking coal costs.