 "Crisil")
The domestic stainless steel demand is expected to grow at a compound annual growth rate (CAGR) of 9 per cent till 2024-25 financial year, according to Crisil Ratings.
The domestic demand for stainless steel was at 4 million tonnes (MT) in fiscal 2021-2022, the ratings agency said in a report on Thursday.
"Domestic demand for stainless steel is projected to log a healthy compound annual growth rate of 9 per cent in the three fiscals through 2025, double the 4.5 per cent pace of the past five fiscals," the Crisil Ratings report said.
The demand will be driven by increasing adoption of stainless steel in railways which is a focus area for government infrastructure spending, and rising application in the automobile and construction sectors.
The demand growth, in turn, will spur capacity additions.
However, the credit profiles of players are expected to remain comfortable, given stable profit levels and healthier balance sheets.
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"Adoption of stainless steel is increasing because of its higher durability and lower maintenance. Demand from railways is expected to more than triple by fiscal 2025 and constitute 20 per cent of incremental demand for the metal over fiscal 2023-2025.
"To be sure, the recent Union Budget has doubled the amount earmarked for manufacturing railway coaches to Rs 47,500 crore for fiscal 2024," said Ankit Hakhu, Director, CRISIL Ratings.
Demand from other major sectors with application of stainless steel, including consumer goods (45 per cent of demand) and process industry (25 per cent), is also expected to grow at a healthy clip of 7-9 per cent over the next 3-5 fiscals given higher consumer spends and recovery in consumption.
Strong demand prospects, coupled with the absence of any major supply addition in the last three fiscals, have set the stage for capital expenditure (capex).
Domestic manufacturers are undertaking capex to add 1 MT of steel melting capacity by fiscal 2024. The industry added 1.3 MT between fiscal 2009 and 2012, post which utilisation and profitability issues led to a phase of stress build-up.
"This time around, the agency said it believes the risk outlook is more favourable," it said.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
