Domestic hot-rolled coil (HRC) prices, which rose to about Rs 52,850 per tonne in April 2025 following the imposition of a safeguard duty, corrected to nearly Rs 46,000 per tonne by November and are currently trading below import parity

Domestic steel demand is expected to grow by around 8 per cent in FY26, supported by steady consumption from infrastructure and construction sectors, but softer prices are likely to keep profitability under pressure, rating agency ICRA said on Wednesday.

In its latest report, ICRA projected the steel industry’s operating margin to remain largely flat at about 12.5 per cent in FY26, lower than earlier expectations of improvement. The agency noted that incremental supply additions have created a temporary surplus in the market, leading to sustained pressure on steel prices.

Domestic hot-rolled coil (HRC) prices, which rose to about Rs 52,850 per tonne in April 2025 following the imposition of a safeguard duty, corrected to nearly Rs 46,000 per tonne by November and are currently trading below import parity. Globally, structural challenges in China have weighed on prices, with Chinese steel exports touching a record 88 million tonnes in the first nine months of calendar year 2025.

Chinese HRC export prices averaged around USD 465 per tonne in the first seven months of FY26, compared to USD 496 per tonne a year ago. Although India’s finished steel imports have declined by about 33 per cent year-on-year in the current fiscal, ICRA stressed that continuation of the safeguard duty is crucial to prevent a surge in imports.

ICRA expects domestic HRC prices to average about Rs 50,500 per tonne in FY26, with operating profit per tonne estimated at USD 108, slightly lower than FY25 levels. The sector outlook has been maintained at ‘Stable’.

The agency also cautioned that large capacity expansion plans of 80–85 million tonnes over FY26–31 could strain balance sheets unless earnings improve. On green steel, ICRA said its share in demand could rise sharply by FY2050, though high costs remain a key challenge in the near to medium term.