India Ratings and Research revises outlook on steel sector
India Ratings and Research (Ind-Ra) has revised the outlook on the steel sector to stable for FY19 from negative in FY18, led by demand growth in domestic and global markets. While it expects stressed steel assets to meet incremental demand over next 18-24 months, the ratings firm felt steel players would gain from improved sales realisations driven by improvement in operational and financial performance in FY19.
In its latest sector outlook, the agency, which is part of the Fitch group which specializes in financial information services, said it believes FY19 will be a year of consolidation for the steel industry. “However, some of the stressed assets may take 12-18 months to ramp-up utilisation to optimum levels. A turnaround in these stressed assets along with new capacities ramp-up could more or less meet the incremental demand, assuming import-exports levels remain steady,” the report said. Steel exports could face pressure due to increasing global trade protectionism and this could consequently affect domestic capacity utilization, it added.
The domestic steel sector which has earlier been facing threat of cheap imports that eased due to a slew of protective measures taken by the government is also expected to benefit from with ongoing capacity rationalisations in China.