Steel Demand in India to Grow 8%: Capacity to Surge by 20 Million Tons by FY2027

India’s steel industry is set to increase its annual capacity by 20 million tons between FY 2025-27, according to a recent report by Acuite Ratings & Research. This growth is driven by strong demand in the automotive, real estate, and infrastructure sectors. The report highlights a projected 8% increase in steel demand in the medium term, reinforcing the positive outlook for India’s steel industry.

Despite facing margin pressures, the industry is expected to maintain sustained capacity expansion over the coming years. The rise in imports from countries like China and Vietnam, driven by China’s excess capacity and sluggish domestic demand, poses a significant challenge. However, the government’s recent implementation of new tariffs on steel imports is expected to mitigate some of these risks.

Suman Chowdhury, Chief Economist and Executive Director at Acuite, noted a 22% year-on-year growth in Chinese steel exports during the April-September 2024 period. This surge, coupled with slow domestic demand, has raised concerns about a flood of low-cost Chinese steel entering markets across Europe and Asia. Imports from Vietnam have also been on the rise. To combat this, India has imposed higher tariffs on steel imports from these countries to protect its domestic industry.

The steel sector is also facing challenges from fluctuating raw material costs, including coking coal and iron ore. Furthermore, increased environmental and regulatory costs are expected to impact cost efficiency in the future.

India’s steel consumption rose 3.6% in FY 2023-24, with per capita consumption doubling from 59 kg in 2013-14 to 119 kg in 2022-23. The country’s crude steel production increased from 109.1 million tons (MT) in 2019-20 to 144.3 MT in 2023-24, reflecting a compound annual growth rate (CAGR) of 7.2%. During this period, the domestic steel industry’s capacity expanded from 142.3 MTPA to 179.5 MT, supporting this production rise.