Amidst a backdrop of subdued domestic demand for steel fueled by the ongoing national election season, India’s steel sector is witnessing a notable surge in exports, offering a silver lining amidst the temporary slowdown in domestic consumption.
As the election-related regulations dampen government spending on infrastructure and construction projects, analysts anticipate a sustained upward trajectory in India’s steel exports throughout the first fiscal quarter. The timing of the national election, stretching from this month through June, has significantly curtailed government-driven investments in infrastructure and construction activities, as administrations are restricted from making major announcements or decisions that could influence voting behavior. This decline in government expenditure has translated into softer demand for steel within the domestic market, prompting a shift in focus towards export-oriented strategies for steel manufacturers.
In February alone, India’s steel exports experienced a remarkable surge, surpassing the one-million-tonne mark and registering a growth rate exceeding 21% compared to the previous month. This surge in export volumes comes at a crucial juncture when the country finds itself transitioning from being a net exporter of steel to a net importer, with the trend reversing in November of the previous fiscal year. Despite the recent uptick in exports, India’s steel sector faces a nuanced outlook characterised by both challenges and opportunities. While the current election-induced downturn in domestic demand presents immediate hurdles for steel manufacturers, the surge in export volumes signals a promising avenue for sustaining growth amidst challenging market conditions. Looking ahead, rating agency Icra Ltd anticipates a moderation in demand growth for domestic steel consumption in FY25, projecting a slowdown from the estimated 12-13% growth witnessed in the previous fiscal year to a more subdued 7-8%. This cautious outlook underscores the need for steel manufacturers to recalibrate their strategies and adapt to evolving market dynamics to navigate through the upcoming fiscal year successfully.
