Fitch Ratings Foresees Contraction in Indian Steel Demand in FY21

SEATTLE (Scrap Monster): The latest research report published by Fitch Ratings suggests that India’s steel sector is expected to contract in FY21.

According to the ratings agency, steel volumes are expected to witness improvement in volumes over the forthcoming few quarters. The increased volumes will be mainly on account of rising rural consumption and increased government spending on infrastructure projects. The operating leverage is likely to result in better operating margins, the Fitch report said.

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The steel prices in India are directly correlated with those in China. For instance, the hot-rolled steel sheet prices in China have rebounded, recording a jump of $100 per metric ton since April this year. Although a bit late, steel price in India too has shown signs of recovery since late-July this year, Fitch Ratings observed.

The agency predicts improved EBITDA for major Indian steelmakers including Tata Steel and JSW Steel from 2QFY21, mainly driven by higher volumes and improved margins. It must be noted that the companies had reported significant decline in earnings during the first quarter of the financial year ending March 2021. The leverage is also likely to remain higher, despite demand-side risks, the report said.