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Credit rating agency ICRA in its latest report has said that domestic steel consumption is likely to witness 9-10 per cent growth this financial year (FY25). The demand for steel was robust in the first quarter of the ongoing financial year (Q1FY25) with consumption growing at a rate of 15 per cent on a year-on-year basis amidst competitively priced imports. Demand may record some sequential slowdown in the current quarter as it is seasonality associated with monsoon, following which government capex may display a back-ended pick up.

ICRA expects the industry to witness capacity utilisation at a decadal high of 88 per cent in spite of an all-time-high capacity addition of 15.6 million tonnes per annum (MTPA) in FY2025 as well as the surge in imports. For the last three years, the steel sector is going through the fastest period of growth witnessed since the global financial crisis. In FY24, the industry registered a consumption growth of 13.6 per cent, which is only marginally lower than the peak of 13.9 per cent registered in FY2006 during the golden period of the country's private sector capex. 

The rating agency said steel being a globally traded commodity, the external environment, therefore, 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. Consequently, domestic finished steel imports have been steadily rising since FY23.