Global Rating agency, Fitch has said that spending by the Indian government on infrastructure will be the catalyst for any meaningful improvement in domestic steel demand. Fitch in its report titled '2016 Outlook: Indian Steel Sector' has said that spending on infra projects such as housing for all and smart cities is the key for the revival of the Indian steel industry, which faces headwinds like cheap imports.
Fitch in its report further highlighted that India's steel consumption to improve marginally by 7-8 per cent in 2016. The agency projected that high imports and soft steel prices globally in 2016 are likely to result in continuing profitability pressures for the Indian steel producers. Further, it added that “their margins are likely to be lower in 2015 and improve marginally in 2016, supported by improving domestic demand and the imposition of safeguard duty on imports on certain steel products for 200 days,”.
As of end-September 2015, Indian steel prices had fallen almost a quarter year-on-year in line with global trends. A relatively stronger rupee in 2015 to date; significant import increases and weak steel demand affected steel prices and consequently, profitability of steelmakers. On the other hand, the imposition of a 20 per cent duty on certain steel product imports, effective September 14, has given them some relief, Fitch said. On the global front, the report stated that global steel prices to remain weak in 2016, driven by weak demand and overcapacity in the industry.