Ind-Ra Downgrades Indian Steel Sector Outlook

SEATTLE (Scrap Monster): The India Ratings and Research (Ind-Ra) announced that it has revised downward its outlook on the country’s steel sector to ‘stable-to-negative’ for the final three-month period (January 2020 to March 2020) of the current fiscal. The revision is mainly on account of projected sluggish steel demand growth. The ratings agency has lowered the steel demand growth expectations from earlier forecast of 7% down to around 4%.

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According to Ind-Ra, the domestic steel market in India faces several challenges, including import risks from Ftree Trade Agreement (FTA) countries such as Japan and South Korea. Further delay in iron ore mine auctions could lead to shortage in raw material availability for steel production. The high raw material costs coupled with declining steel prices are likely to squeeze margins for steel producers.

The overall steel sales volume and margins are feared to weaken further in second quarter of fiscal 2020, Ind-Ra noted. Consequently, steel producers are likely to see further moderation in cash flows from operations.

The agency forecasts recovery in steel demand in second half of FY20, mainly aided by government fiscal stimulus measures and improved market sentiments.