India's Steel Consumption Set to Surge by 9% in 2025 Despite Global Decline: Analysis

New Delhi, Jan 8 (NationPress) Steel consumption in India is projected to maintain its status as a frontrunner among major steel-consuming countries in the calendar year 2025, with a growth rate of 8-9%. This growth is primarily attributed to a transition towards steel-intensive construction within the housing and infrastructure domains, alongside rising demand from sectors such as engineering, packaging, and others, according to a report released by the rating agency CRISIL.

In 2024, India's steel demand is forecasted to rise by 11%, compared to 5.6% in Brazil, despite a global decline of around 1% in steel demand, as highlighted in the report.

China, the leading steel producer and consumer, experienced a 3.5% decrease in demand, predominantly due to falling demand from the real estate sector, despite favorable policy adjustments and the introduction of support packages.

Similarly, steel demand in Europe, Japan, and the United States also witnessed a decline, estimated at 2-3%. Nevertheless, the demand growth in emerging economies like India and Brazil has helped mitigate a more drastic global downturn, as stated in the report.

For 2025, India is expected to remain at the forefront of demand, while global steel consumption is anticipated to slightly increase by 0.5-1.5%, driven by improved financing conditions and pent-up demand from key steel-consuming nations, thereby bolstering manufacturing operations. A projected recovery in residential construction within regions like the EU, US, and Korea, aligned with easing financing conditions, will further support this growth, according to the report.

However, concerns persist regarding the domestic supply of steel in India, as noted in the report.

Sehul Bhatt, Director-Research at CRISIL Market Intelligence and Analytics, remarked, "In 2024, the supply growth from India's mills was modest at 5.2%, due to extended planned and maintenance shutdowns. Overall crude production from the top seven producers rose by just 0.05%, while finished steel production saw a 0.5% increase. Conversely, crude and finished steel output from medium and small manufacturers surged by 14% and 11.3%, respectively, underscoring the consistent demand from long steel end-users."

The increase in competitive imports and a drop in exports also contributed to the subdued production growth in 2024. Finished steel imports rose by 24.5%, while exports fell by 6.4%, resulting in an additional availability of 3.2 million tonnes of finished steel, beyond domestic production. This extra supply accounted for approximately 2% of the total finished steel demand, the report indicated.

The report also highlights that finished steel imports from all major exporters to India have significantly increased in recent years. For example, between 2022 and 2024, finished steel imports from China surged 2.4 times, while imports of hot rolled coils skyrocketed 28 times.

In a similar vein, overall finished steel imports from Japan saw a 2.8-fold increase in 2024 compared to 2022, while HRC imports surged by 16.6-fold, and finished steel imports from Vietnam escalated by eight-fold.

Meanwhile, domestic steel prices experienced a decline in 2024, impacted by the heightened availability of materials due to increased net imports. HRC prices fell by 9%, and CRC prices dropped by 7%, consequently slowing the revenue growth of domestic mills, as stated in the report.

Nevertheless, the reduction in coking coal prices, coupled with low volatility, has alleviated margin pressures to some extent. The spot price for Premium Low Volatility coking coal from Australia decreased by 12% in 2024, while iron ore prices are estimated to have risen by 9-10% during the same period. Notably, China’s HRC export prices also fell by 12% in 2024 and continue to trade at a discount compared to domestic mill prices.

The report concluded: "The proposed safeguard duty from the industry could prove beneficial in this scenario. If implemented by the end of February, steel prices in 2025 are expected to be significantly higher than in 2024, with a more pronounced impact in the first half of the year."