India's steel consumption is anticipated to see a substantial growth of 9-10% during this financial year, according to a recent report by the rating agency ICRA. This growth is underpinned by robust demand witnessed in the first quarter, where consumption surged by 15% YoY. The increase in demand has been largely driven by competitively priced imports, which have bolstered the domestic steel market.

Growth Drivers and Forecast

Despite a forecasted sequential slowdown in demand due to seasonal factors related to the monsoon, the steel sector is expected to recover towards the end of the year. This recovery is anticipated to be supported by increased government capital expenditure. ICRA projects that the capacity utilization in the steel sector will hit a decadal high of 88% in FY25. This high capacity utilization comes even in the face of unprecedented capacity additions of 15.6 million tonnes per annum (MTPA) and a notable rise in imports.

Sector Performance and Global Impact

The Indian steel sector has been experiencing rapid growth, marking its fastest expansion since the global financial crisis. With a 13.6% increase in consumption in FY24, the sector is approaching the 13.9% peak observed in FY06. The global steel market has had a significant impact on the domestic industry. Sub-par economic growth in China and other major steel-producing regions has led to a redirection of trade flows towards high-growth markets like India. As a result, domestic finished steel imports have been on the rise since FY23.

Future Outlook

The steel sector's performance highlights a period of dynamic change and growth. The increase in capacity utilization and the significant rise in import levels reflect a market that is adapting to both domestic and global influences. As the year progresses, the sector's ability to leverage these changes will be crucial in maintaining its growth trajectory and addressing emerging challenges.

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