India’s steel industry is set to experience a significant dip in capacity utilization, forecast to fall below 80% for the first time in four years due to a surge in cheap imports. According to the Indian rating agency ICRA, the country’s steel sector, which had maintained a steady capacity utilization of over 80% from 2021 to 2024, is facing increasing challenges with imports undermining local production.
ICRA’s Senior Vice President, Girishkumar Kadam, highlighted that the capacity utilization is expected to drop from 85% in FY2023/2024 to around 78% in FY2024/2025. This would mark the lowest level in four years for the Indian steel industry, which has otherwise benefitted from a strong post-COVID recovery, robust investments, and manageable debt levels in the last three years.The influx of cheap steel imports, especially from China, has contributed to a reduction in market share for domestic steelmakers. With China’s slowing economic growth and a shift in global steel trade flows, India has seen a rise in imports, particularly rolled steel products. Between April and October 2024, India’s imports of rolled steel products surged to a seven-year high of 5.7 million tons.
This influx is putting pressure on the local industry, already grappling with increasing capacity expansion plans. Despite record investments—estimated at $45-50 billion for new capacity additions—there are concerns that the profitability of steel mills may not rise sufficiently to offset the growing competition from foreign imports. India, the world’s second-largest steel producer, has become a net importer of steel, a trend that began in FY2023/2024. In response to the growing import influx, the Ministry of Steel has proposed a 25% safeguard duty on certain steel products, aiming to protect local manufacturers from the adverse effects of cheap foreign imports. The situation poses a serious challenge to the Indian steel industry, as it navigates the risk of diminished profitability amidst rising global competition and a slower-than-expected demand recovery.
