STEEL INDUSTRY – TRENDS

& OUTLOOK
Steel prices likely to remain under
pressure for the remainder of FY2023
as concerns over economic slowdown
grip major global consumption hubs
AUGUST 2022
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OVERVIEW
Given the heightened uncertainty
following the Russia-Ukraine war,
growth in crude steel production in the
key steel consumption hubs of the US,
the European Union, Japan, and South
Korea remained in the negative
territory in the first four months of
FY2023; Chinese steel production
growth also remained in the negative
territory for thirteen consecutive
months since July 2021; India is the
only bright spot in the pack for now,
with domestic crude steel production
growing by a healthy rate of 8.9% in
April-July of the current fiscal
▪ The road ahead may be bumpier for domestic steel companies as the external environment
becomes increasingly challenging following the Russia-Ukraine war, stifling economic activity in
key steel consumption hubs of the US, the European Union, Japan, and South Korea.
▪ The steel demand environment in China is also treading on a slippery slope, as the economy
braces for the impact of the property bubble, strict zero Covid lockdowns, and a severe ongoing
drought.
▪ Domestic hot-rolled-coil (HRC) prices have contracted by a steep 26% in FY2023 so far; given the
uncertain global economic outlook, domestic steel prices could remain under pressure for the
remainder of FY2023.
▪ While ICRA had earlier expected India’s finished steel export to contract by a modest 25% in the
current fiscal, the same is most likely to contract by a steeper 40-45%, as seaborne steel prices
witness a much sharper-than-anticipated correction, making exports highly unattractive.
▪ Profits of domestic steel mills are expected to sequentially slide further in Q2 FY2023; however,
the significant moderation in seaborne coking coal prices is expected to partly cushion the impact
of steel price corrections in the second half.
▪ The industry’s capex spend is poised to increase by 45% over FY2022. However, given the
deleveraging that has already happened over the last two fiscals, notwithstanding a moderation
in earnings, the industry’s key leverage ratio of Total debt/ OPBITDA is expected to remain at a
comfortable 1.3 time in FY2023.
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What’s Inside?

1 War, runaway inflation, and

macro headwinds 2 Steel demand recovery in key
global steel-producing hubs 3 The duty speed-breaker - Key
Government advisories

4 5 6
Flashback to 2008 – Duties For Raw material scenario: Iron ore, Trends in domestic steel demand
the short or long haul? pellets, coal

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What’s Inside?

7 Short-range outlook for Indian

steel mills 8 Performance of ICRA's rated
portfolio in the steel sector 9 Company section

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 Analytical Contact Details

Jayanta Roy Priyesh Ruparelia Ritabrata Ghosh

Senior Vice President Vice President Vice President

jayanta@icraindia.com priyesh.ruparelia@icraindia.com ritabrata.ghosh@icraindia.com

033 – 7150 1120 022 – 6169 3328 033 – 7150 1107

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 Analytical Contact Details

Deepayan Ghosh

Senior Analyst

deepayan.ghosh@icraindia.com

033 – 7150 1220

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 Business Development/Media Contact Details

L. Shivakumar Jayanta Chatterjee Naznin Prodhani

Executive Vice-President Executive Vice-President Head Media & Communications

shivakumar@icraindia.com jayantac@icraindia.com communications@icraindia.com

022- 6114 3406 080 – 4332 6401 0124 – 4545 860

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