Healthy demand, weak prices: ICRA flags margin pressure for Steelmakers in FY26

Domestic steel demand growth rate is expected to remain robust at around 8 per cent in FY2026 , but continued weakness in steel prices is likely to keep operating margins of producers under pressure, according to a report by rating agency ICRA .

The agency said the operating environment for domestic steelmakers will remain challenging over the coming quarters due to subdued steel prices, sticky input costs and an unfavourable global environment. As a result, industry operating margins are expected to remain largely flat at around 12.5 per cent in FY2026 , lower than ICRA’s earlier expectation of a 13.5 to 13.6 percent growth

With muted earnings momentum, industry leverage measured by total debt to operating profit before depreciation, interest, taxes and amortisation (TD/OPBDITA) is projected to rise to 3.4 times in FY2026, compared with ICRA’s earlier estimate of 3.1 times and 3.5 times reported in FY2025.

ICRA noted that the domestic steel industry has witnessed record capacity additions of nearly 15 million tonnes over the past three to four quarters, with another 5 million tonnes expected by the end of the current fiscal. While steel demand growth of around 8 per cent in FY2026 translates into incremental demand of 11-12 million tonnes per annum, the sharp rise in supply has created a temporary surplus , exerting continued pressure on prices.

Domestic hot rolled coil (HRC) prices, which had surged to ₹52,850 per tonne in April 2025 following the imposition of a 12 per cent safeguard duty, declined to around ₹49,500 per tonne by September 2025 and further to about ₹46,000 per tonne by November 2025. Currently, domestic prices are trading below import parity, reflecting persistent supply-side pressures.

On the global front, ICRA highlighted that structural challenges in the Chinese economy have led to a surge in China’s steel exports , which rose to an all-time high of 88 million tonnes during the first nine months of calendar year 2025. With major steel-consuming regions facing subdued economic activity, global steel prices are unlikely to see a meaningful recovery in the near term.

Although India’s finished steel imports have declined sharply during the current fiscal, ICRA cautioned that rising trade barriers in markets such as the US and the European Union could divert surplus global steel into India. In this context, the agency said the continuation of the safeguard duty remains critical to protect domestic prices.

Against this backdrop, attention has turned to the financial strength of India’s leading steelmakers. The country’s largest producers include Tata Steel, JSW Steel, Steel Authority of India Ltd (SAIL), and ArcelorMittal Nippon Steel India (AMNS India).

In terms of scale, JSW Steel reported revenue of around ₹1.7 lakh crore in FY2024, making it the largest domestic steelmaker by turnover. Tata Steel recorded consolidated revenue of approximately ₹1.4 lakh crore, while state-owned SAIL posted revenue of just over ₹1 lakh crore during the same period. AMNS India, a joint venture between ArcelorMittal and Nippon Steel, reported turnover of around ₹60,000 crore, reflecting its growing presence in the flat steel segment.

Looking ahead, ICRA noted that domestic steel mills are planning capacity additions of 80-85 million tonnes by FY2031, involving investments of USD 45-50 billion. However, the agency cautioned that unless earnings improve meaningfully, such large-scale investments could lead to higher leverage and increased vulnerability to external shocks, even as the sector outlook remains stable.