India Steel Sector To See Resilient Growth In FY26 Amid Global Shifts

Indian steel-makers are expected to see a robust first quarter this fiscal, backed by high domestic steel prices and the continued benefit of safeguard duties.

Coking coal prices are expected to remain relatively stable through first quarter of financial year 2026, offering a foundational predictability for raw material costs.

While a monsoon-induced weakness is expected in second quarter as construction activity slows, this is not a major concern given the cyclical nature of the industry. A robust upturn is anticipated once the rains subside.

Against this backdrop, major Indian steel players like JSW Steel Ltd. and Steel Authority of India Ltd. are gearing up for improved margins in the coming quarters. Their confidence stems from a robust domestic demand, with India's appetite for steel consistently growing, fuelled by ongoing infrastructure projects and overall economic growth.

These companies are also keenly focused on the strategic planning and execution of their capex plans, aiming to enhance efficiency and expand capacity, which should further bolster their profitability.

Furthermore, recent global trade shifts, such as the US tariff hike on steel and aluminium from 25% to 50%, are expected to have limited impact on the Indian steel industry. This is primarily because India's direct exports of steel to the US account for a small fraction of its total exports—combined steel and aluminium exports stood at approximately $4.56 billion in FY25.

While the domestic story holds promise, the international arena presents a more complex picture. China's carbon and stainless-steel exports remained significantly high in previous financial year, largely due to weaker domestic demand pushing surplus steel into global markets. This surge in Chinese exports has kept Asian steel conversion spreads compressed, currently about 30% below their long-term averages.

However, this compression also holds a silver lining. Historically, when these global spreads dip below a certain threshold (around $200 per tonne), investing in steel stocks tends to yield good returns in the subsequent year. The expectation is that these spreads will eventually expand, particularly if China's domestic demand begins to recover or if global steel production cuts are implemented.

Despite these potential long-term global tailwinds, Indian steelmakers have faced the challenge of domestic steel prices being at a premium compared to imported steel, even after factoring in existing safeguard duties. This price difference has made imports attractive. However, this is likely to be countered effectively by the potential for extended safeguard duties, which would help mitigate the impact of high Chinese exports and ensure a more level playing field for domestic producers.

In essence, the outlook for the Indian steel sector in FY26 is decidedly positive. While the industry will continue to monitor global dynamics, the proactive stance on safeguard duties is expected to effectively manage import challenges.

This, coupled with the strong domestic demand, robust infrastructure push, and strategic capex by major players, positions Indian steelmakers to capitalise on their strong domestic foundation and strategic investments, ensuring sustained growth and profitability throughout FY26.