Ind-Ra Downgrades Steel Sector Outlook on Concerns of Demand Slowdown

SEATTLE (Scrap Monster): India Ratings and Research (Ind-Ra) has revised its outlook on Indian steel sector for the current fiscal, based on fears of tepid demand growth in the near future. The ratings agency has downgraded the steel sector rating to ‘stable-to-negative’. Also, it revised downwards the steel demand growth forecast from 7% to 4%.

The statement released by the agency notes that the low expectations of steel demand growth in the country, due to uncertainties in various end-use sectors including automotive, construction and real estate sectors has forced it to downgrade the outlook. The revision is also attributed to slowdown in global growth and ongoing trade tensions between various countries around the world, which has negatively impacted steel shipments.

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The country’s domestic steel sector is likely to face intense pressure from rise in imports, especially from countries such as South Korea and Japan, on account of free trade agreement with these countries. The delay in auctioning of iron ore mines in the country may impact the availability of the steelmaking raw material. Further, this may result in further rise in raw material costs, Ind-Ra noted.

The ratings agency anticipates decline in sales volumes in the second quarter of fiscal year 2019-’20. The margins too are expected to remain compressed as in the previous quarters. However, increased government infrastructure spending and improved market sentiments may propel steel demand recovery in the second half of the fiscal.