India’s Small Steelmakers Cut Production as Weak Demand and Monsoon Slowdown Hit Construction Sector

India’s small steel producers are facing one of their toughest quarters in recent years as weak demand, falling prices, and sluggish construction activity force them to scale back production. Despite the Indian government’s biggest consumer tax cuts in eight years aimed at boosting growth, the steel industry, particularly small and mid-sized mills, continues to struggle under mounting pressure.

According to industry reports, small producers who contribute nearly 45 percent of India’s total steel capacity of around 200 million metric tons have reduced production by nearly one third. The slowdown comes as prolonged monsoon rains disrupt construction projects, delaying new orders and reducing steel consumption.

Construction activity, which accounts for nearly one third of India’s steel demand, has slowed significantly since July when heavy rains began. Rising raw material and electricity costs have further squeezed profit margins, leaving small mills with little choice but to curb output. Demand from the automobile sector, another key consumer of steel, has also remained subdued despite recent reductions in the Goods and Services Tax (GST).

Domestic steel prices have mirrored this downturn. In September, prices for hot rolled coil dropped to a six month low of around ₹49,100 per ton or approximately $553, according to data from commodities consultancy BigMint. This decline has put additional strain on small manufacturers who are already grappling with liquidity challenges and reduced export opportunities.

Industry leaders believe that the situation may remain difficult until at least December. “There is a slowdown, and there is no significant demand from the construction side,” said Adarsh Garg, Chairman of Jogindra Group. “We are hoping that the recent GST cuts will eventually support automobile demand and bring some stability.”

The contrast from last year is striking when strong domestic demand and a surge in infrastructure spending fueled record steel output. Now, small producers are seeking government support to offset high energy costs and safeguard jobs in a sector that employs over 1.5 million people.

With the festive season approaching, industry watchers are cautiously optimistic that steel demand could pick up, driven by infrastructure projects and renewed construction activity after the monsoon. Until then, India’s small steelmakers remain under pressure, navigating a delicate balance between production costs and market recovery.