Domestic steel demand to grow 7.5% in FY24: Indian Steel Association

The ISA said that with strong momentum in infra spending and sustained growth in urban consumption, steel demand in India would expand by 8-9 mt every year in the next two financial years

Steel demand in India is expected to grow 7.5 per cent to 128.85 million tons (mt) in the current financial year, according to the Indian Steel Association (ISA).

The steel industry body said that with strong momentum in infrastructure spending and sustained growth in urban consumption, steel demand in India would expand by 8-9 mt every year in the next two financial years, resulting in an expected growth of 7.5 per cent in 2023-24 and 6.3 per cent in 2024-25 to touch 136.97 mt.

Steel demand in FY23 rose by about 13.3 per cent to reach 119.86 mt led by higher production and domestic demand.

The ISA forecast is from the demand side and in consideration of the steel using sub-sectors. The association expects all steel using sub-sectors to grow at 6 per cent or above in both FY24 and FY25.

Steel demand has a strong correlation with GDP growth. “In an otherwise gloomy global economic environment, India has been a bright spot, defying global trends. India’s GDP grew by 9.1 per cent in 2021-22, is estimated to grow by 7 per cent in 2022-23 and is forecasted to grow by 6.4 per cent in 2023-24,” the ISA said.

The association also said that India had successfully reigned-in inflation that was still plaguing major advanced economies. “The steel sector has benefited from strong economic growth as the correlation between growth in steel demand and GDP growth is quite strong, especially if the economy grows by around 6 per cent or more with the multiplier being more than one in such scenarios,” it added.

“The rising share of investment in GDP, backed by strong capital expenditure outlay by the government and improving private investments will drive the construction, railways and capital goods sector,” the ISA said.

The association pointed out that the government increased its budgeted capex in FY24 by 33 per cent to Rs 10 trillion, of which 50 per cent has been allocated for road and railway infrastructure. “This will drive growth in steel demand,” it said.

Project completion in the real estate sector is also expected to be “robust”. “The investments in infrastructure, renewables, mining as well as within the steel sector itself, (thanks to the PLI Scheme), is expected to benefit the capital goods sector,” the ISA said.

The consumption driven steel using sectors – automotive and consumer durables – were expected to maintain “healthy” growth. “The private consumption will largely be sustained by urban consumption while rural consumption is expected to witness a steady recovery,” ISA said.

However, the intermediate goods sector, dependent on the automobile sector’s growth as well as exports, was more of a mixed bag, according to ISA, with sluggish global demand limiting the potential of the export sector in general.

“Nevertheless, growth will remain healthy in this sub-sector mainly due to the related growth in the automobile and capital goods sector,” it said