China’s Steel Surge Pressures Indian Giants as Fitch Lowers Rating Headroom

India’s steel industry is feeling the heat as Fitch Ratings downgraded the rating headroom for JSW Steel and Tata Steel. The agency cited a surge in cheap steel imports from China and potential tariff hikes from major economies, including the US, as key concerns. These factors are expected to put pressure on domestic steel prices through the financial year ending March 2026.

Fitch’s latest report shows that Tata Steel’s rating stands at BBB-/Negative, while JSW Steel is rated BB/Stable. With rising competition from Chinese steelmakers, both companies could face financial strain. India, once a steel export powerhouse, became a net importer of finished steel in FY24. Between April and December 2023, steel shipments from China hit a record high, further intensifying concerns.

Despite these challenges, India’s steel demand is soaring due to rapid urbanization, infrastructure expansion, and industrial growth. The government anticipates a major boost in production, aiming to increase steel output from 120 million tons to 300 million tons within the next five years. However, Fitch warns that both Tata Steel and JSW Steel are likely to breach their negative sensitivity thresholds for EBITDA leverage in FY25, with JSW expected to exceed 3.7x and Tata Steel surpassing 3.0x.

Looking ahead to FY26, Fitch predicts ongoing margin pressures despite potential improvements in EBITDA margins. However, recovery could be on the horizon, driven by factors such as robust domestic demand, a decline in raw material costs (iron ore and coking coal), and China’s attempts to curb steel production while rolling out economic stimulus measures.

While the Indian steel industry is facing strong headwinds, long-term domestic growth and strategic policy measures could help stabilize the market. The coming years will be crucial in determining how Indian steelmakers navigate these global pressures.