DelhiDesk ICRA, the Indian credit rating agency, has revised its baseline steel price predictions for FY2024, anticipating an average year-on-year decrease of 4-5% in domestic HRC prices, in contrast to the previously expected marginal year-on-year rise of 1-2%. The shift comes as the initial surge in steel demand has lost momentum, resulting in a surplus in the domestic market. This could lead to increased steel imports of up to 30-40% year-on-year in FY2024, potentially making India a net steel importer after a five-year interval. Despite upcoming capacities of around 36 million tonnes per annum, the government’s capital expenditure drive and efforts to stimulate domestic steel consumption are expected to maintain the industry’s capacity utilization rate at around 80% in FY2024.

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๐Ÿ‘‰ ICRA has revised its baseline steel price predictions for FY2024, forecasting a year-on-year decrease of 4-5% in domestic HRC prices.
๐Ÿ‘‰ Domestic steel demand grew 7.2% in April 2023, aligning with ICRA’s full-year growth projection of 7-8%.
๐Ÿ‘‰ Present dynamics suggest a more challenging landscape for the steel industry, with a surplus in the domestic market and Chinese HRC export offers plummeting.
๐Ÿ‘‰ Domestic HRC prices are currently trading at a premium of $50/MT compared to Chinese imports, raising the possibility of a greater-than-expected surge in steel imports in FY2024.
๐Ÿ‘‰ Seaborne prime hard coking coal offers from Australia are projected to decrease by 20-25% from FY2023 levels, partially mitigating the impact of steel price corrections observed thus far in the current fiscal year.
๐Ÿ‘‰ The industry’s capacity utilization rate is expected to remain at around 80% in FY2024, with upcoming capacities and government stimulus efforts.
๐Ÿ‘‰ The industry may increasingly rely on external financing to meet committed expansion plans, with the industry’s leverage projected to worsen.
๐Ÿ‘‰ Despite this, ICRA maintains a ‘stable’ outlook for the sector with an expected EBITDA per metric ton range of approximately $100-150 in FY2024.

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