
Rise in India's steel demand in 2025: Impact on Indian Steel Industry & Share Market
As per the forecast by Indian rating agency CRISIL, India's steel demand is projected to grow by 8-9% in 2025, significantly outpacing the growth rates of other countries. This optimistic outlook reflects a strong trajectory for the Indian steel industry, driven by multiple demand-side factors. We will look at all the details in this article.
What is driving the increased steel demand?
The growth in steel demand is primarily attributed to a transition towards metal-intensive construction in the residential and infrastructure sectors. Large-scale government initiatives such as the Pradhan Mantri Awas Yojana (housing for all) and the Gati Shakti Master Plan (infrastructure development) are expected to be major catalysts.
Additionally, rising demand from sectors like engineering, packaging, and industrial manufacturing will further contribute to this growth. Analysts also point to increasing urbanization and the shift towards sustainable and durable materials in construction as long-term drivers for steel consumption.
Challenges in Domestic Supply
Despite the optimistic demand outlook, concerns about domestic steel supply persist. Analysts suggest that Indian steel plants saw a 5.2% year-on-year growth in supply during 2024, although it was constrained by long periods of planned and preventive maintenance.
Notably, the seven largest steel producers (India) reported negligible growth in total steel production, with an increase of just 0.05% year-on-year in 2024. Meanwhile, production of rolled steel grew marginally by 0.5% year-on-year. In contrast, medium and small players in the steel industry performed better, registering a 4% increase in steel output and an 11.3% rise in rolled product output.
Steel Pricing Dynamics and Safeguard Duty
Steel prices in India remain under pressure due to weak global steel prices. In 2024, the price of hot-rolled coils fell by 9% year-on-year, while cold-rolled steel prices declined by 7% year-on-year. However, CRISIL anticipates a reversal of this trend in 2025, driven by the potential implementation of a safeguard duty on steel imports.
“Domestic prices are currently soft, but the introduction of the safeguard duty could lead to a 4-6% rise in steel prices in 2025,” said Vishal Singh, Research Director at CRISIL Market Intelligence and Analytics.
This safeguard duty, reportedly under consideration since December 2024, is expected to impose a temporary levy of up to 25% on steel imports, particularly targeting cheap imports from China. The measure aims to protect domestic producers from the adverse effects of low-cost imports flooding the market.
Impact on the stock market
The projected growth in steel demand and the dynamics of domestic supply and pricing, as detailed in the CRISIL report, is likely to have several implications for the Indian stock market, particularly for steel and related sectors. Let us first look at the positive impact:
- The forecast of an 8-9% growth in steel demand in 2025 indicates strong tailwinds for Indian steel companies. Key players such as Tata Steel, JSW Steel, and Steel Authority of India (SAIL) could see improved sales volumes, potentially boosting their revenues and profitability.
- If the proposed safeguard duty of up to 25% on steel imports is implemented, domestic producers could benefit from reduced competition with cheaper Chinese imports. It would likely support higher utilization levels and stabilize margins, particularly for mid-tier and smaller steel producers that are more vulnerable to price competition.
- The combination of strong demand growth and the potential safeguard duty could lead to positive sentiment among investors in steel stocks, potentially driving their stock prices higher.
- Increased steel demand driven by infrastructure and residential construction indicates potential benefits for companies in these sectors. Stocks of infrastructure-focused companies such as Larsen & Toubro (L&T) and real estate developers could also rally.
Key Indices and Sectors to Watch
- Nifty Metal Index: Likely to react positively, given the potential benefits for domestic steel producers.
- Real Estate and Infrastructure Stocks: Companies in these sectors could see growth driven by metal-intensive construction.
- Automobile and Manufacturing Stocks: These sectors might face headwinds due to higher steel input costs.
Before you go
As India continues to position itself as a global manufacturing hub and invests heavily in infrastructure, the steel industry is poised to benefit significantly. However, balancing strong demand growth with consistent domestic supply and navigating pricing challenges will be key to sustaining this momentum.