03 - 08 - 2026

India to remain among fastest-growing global steel markets in FY27

India will remain among the fastest-growing steel markets in financial year 2027 (FY27), amidst oversupply in global steel markets, geopolitical uncertainties, evolving trade barriers, and tightening sustainability regulations.

The sector’s strengthened balance sheets would support ongoing investments without materially weakening leverage metrics. However, execution of expansion projects, carbon-transition requirements, and export-related regulations are key monitorables for the sector, India Ratings and Research (Ind-Ra) said in a report.

The rating agency maintained a “neutral” outlook on the Indian steel sector for FY27. This was based on domestic demand, supportive trade measures, stable raw-material costs, and disciplined capacity expansion continuing to support profitability, cash flows, and credit profiles.

“India’s steel demand outlook remains structurally positive, supported by infrastructure and manufacturing growth. The profitability of steel players is also supported by the government imposing safeguard duties. However, raw material price volatility, significant capacity expansion risks, lower import quota in the EU, and the impact of Carbon Border Adjustment Tax (CBAM) on EU exports are the key near- to medium-term monitorables,” said Rohit Sadaka, Director-Large Corporates, Ind-Ra.

India’s steel demand to grow at a high-single-digit percentage year-on-year (yoy) in FY27 (7.4 per cent in FY26, 10.4 per cent in FY25), driven by the government’s continued infrastructure spending and demand from the construction, engineering, and automotive sectors, and a likely pickup in private capex.

The capacity additions across the industry will broadly keep pace with demand growth, preserving the domestic demand-supply balance and supporting volume growth. Despite weak demand trends across several global markets, structural growth drivers will keep India among the fastest-growing steel markets globally.

Profitability, cash flows to improve

The profitability and cash flows to improve in FY27, supported by safeguard duties, easing import pressure, stabilising steel prices, and favourable raw-material costs. India’s import-control measures have materially reduced the impact of China-led global oversupply, supported by domestic pricing and improving spreads, particularly in flat steel products, it said.

Steel imports declined 18 per cent YoY in FY26 after the government enforced safeguard duties, Bureau of Indian Standards (BIS) norms, and anti-dumping measures. However, Ind-Ra continues to view raw-material price volatility, geopolitical disruptions, and evolving trade policies as key risks to the industry’s earnings performance.

Ind-Ra believes ongoing capacity expansion is unlikely to materially weaken the steel sector’s credit metrics, as most producers are pursuing growth with balance sheets after sustained deleveraging and cash generation. The agency expects net leverage and interest coverage metrics to remain stable through FY27-FY28, supported by profitability, improving fixed-cost absorption, operating efficiencies, and calibrated capital allocation.

While free cash flow is likely to remain negative due to expansionary capex and working-capital requirements are likely to increase as new capacities ramp up, Ind-Ra does not foresee liquidity pressure for large and mid-sized steel producers. Most major players have adequate refinancing flexibility, committed funding lines, and access to long-tenor debt structures, although lower-rated and non-integrated players could face pressure from competition, weaker conversion margins, and refinancing requirements.

Iron ore, coking coal prices

Both iron ore and premium coking coal prices to remain largely range-bound in FY27. Ind-Ra believes adequate global and domestic iron ore supplies will offset rising demand from steel production growth, while subdued global steel demand should limit upward pressure on coking coal prices despite supply tightness in China and Australia. This stable raw-material environment is likely to support sector profitability, cash generation, and earnings visibility in FY27.