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China is the world’s largest producer of steel and accounts for more than half the total production.“>
Steel makers are likely to moderate their capital expenditure plans in 2025 as prices of the alloy remain under pressure. Their debt reduction plans are also likely to be hit as cash flows may be impacted.
Prices of hot-rolled coils (HRCs) in India fell 8-10% year-on-year in 2024 amid an onslaught of steel from China, pulling them to their lowest levels in more than four years. Prices of flat steel products have seen a higher impact as compared to long steel products, said experts, even as the overall consumption of steel products is seen growing in high single-digits for the year.
“Without favourable conditions for investments, capital expenditure will naturally take a back seat,” said a top executive at one of the country’s largest steel companies. “Given the long gestation period for steel capacity expansion, domestic steel makers need a stable environment for their plans to materialise,” the person said, requesting not to be named.
To align with the National Steel Policy, which envisages 300 million tonnes (mt) of domestic production capacity by the end of the decade compared to over 185 mt now, most steel makers are in the midst of expanding capacities. Subdued profitability so far this year, though, has impacted cash flows.
JSW Steel, the country’s largest steel maker, cut its capex to INR 16,000-17,000 crore for the year from INR 20,000 crore planned earlier. AM/NS India (formerly Essar Steel) chief Dilip Oommen said earlier this year that future investments by Indian companies are likely to be impacted amid increasing imports of steel from China.
Even though steel makers now have stronger balance sheets as compared to the previous downturn for the steel space around eight years back, companies are unlikely to stretch their leverage, especially as capacity utilisation at the industry level is set to fall below 80% for the first time in four years.
“If capacity utilisation slips below 80%, then the inclination to invest more reduces because the existing capacity can meet one or two more years of demand,” said Ritabrata Ghosh, sector head for corporate ratings at Icra. While the bank debt per tonne of steel is currently at USD 192 as compared to USD 390 in 2015-16 (April-March), steel makers may not want to over-invest, he said.
Given that most imports coming into the country are for flat steel products, the correction in prices has been sharper in flat steel products. “So, to an extent, any kind of capital reallocation or slowdown will be much more on the flat’s side,” Ghosh said.
Most large steel makers in India have a higher production capacity for flat steel as compared to long steel. “Usually what happens is that long products are at a discount to HRCs, but the situation has reversed in the last six months, largely because of dumping from China,” said Aditya Welekar, analyst at Axis Securities.
Jindal Steel and Power has the highest long steel production capacity as a percentage of its total mix. Its shares have risen more than 26% so far in 2024, outperforming peers. Steel Authority of India shares are down nearly 4% so far in 2024, while Tata Steel and JSW Steel gained 0.5-4.7%.
China is the world’s largest producer of steel and accounts for more than half the total production. A slowdown in consumption, especially in real estate, has led to China exporting steel in a big way, which has hurt prices of steel globally.
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Prices of flat steel products have seen a higher impact as compared to long steel products, said experts, even as the overall consumption of steel products is seen growing in high single-digits for the year.
China is the world’s largest producer of steel and accounts for more than half the total production.“>
Steel makers are likely to moderate their capital expenditure plans in 2025 as prices of the alloy remain under pressure. Their debt reduction plans are also likely to be hit as cash flows may be impacted.
Prices of hot-rolled coils (HRCs) in India fell 8-10% year-on-year in 2024 amid an onslaught of steel from China, pulling them to their lowest levels in more than four years. Prices of flat steel products have seen a higher impact as compared to long steel products, said experts, even as the overall consumption of steel products is seen growing in high single-digits for the year.
“Without favourable conditions for investments, capital expenditure will naturally take a back seat,” said a top executive at one of the country’s largest steel companies. “Given the long gestation period for steel capacity expansion, domestic steel makers need a stable environment for their plans to materialise,” the person said, requesting not to be named. To align with the National Steel Policy, which envisages 300 million tonnes (mt) of domestic production capacity by the end of the decade compared to over 185 mt now, most steel makers are in the midst of expanding capacities. Subdued profitability so far this year, though, has impacted cash flows.JSW Steel, the country’s largest steel maker, cut its capex to INR 16,000-17,000 crore for the year from INR 20,000 crore planned earlier. AM/NS India (formerly Essar Steel) chief Dilip Oommen said earlier this year that future investments by Indian companies are likely to be impacted amid increasing imports of steel from China.Even though steel makers now have stronger balance sheets as compared to the previous downturn for the steel space around eight years back, companies are unlikely to stretch their leverage, especially as capacity utilisation at the industry level is set to fall below 80% for the first time in four years.”If capacity utilisation slips below 80%, then the inclination to invest more reduces because the existing capacity can meet one or two more years of demand,” said Ritabrata Ghosh, sector head for corporate ratings at Icra. While the bank debt per tonne of steel is currently at USD 192 as compared to USD 390 in 2015-16 (April-March), steel makers may not want to over-invest, he said.Given that most imports coming into the country are for flat steel products, the correction in prices has been sharper in flat steel products. “So, to an extent, any kind of capital reallocation or slowdown will be much more on the flat’s side,” Ghosh said.Most large steel makers in India have a higher production capacity for flat steel as compared to long steel. “Usually what happens is that long products are at a discount to HRCs, but the situation has reversed in the last six months, largely because of dumping from China,” said Aditya Welekar, analyst at Axis Securities.Jindal Steel and Power has the highest long steel production capacity as a percentage of its total mix. Its shares have risen more than 26% so far in 2024, outperforming peers. Steel Authority of India shares are down nearly 4% so far in 2024, while Tata Steel and JSW Steel gained 0.5-4.7%.China is the world’s largest producer of steel and accounts for more than half the total production. A slowdown in consumption, especially in real estate, has led to China exporting steel in a big way, which has hurt prices of steel globally.
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