Indian steelmakers’ credit profiles gain from strong demand: Fitch

Indian steelmakers’ credit profiles are likely to remain supported by strong domestic demand, firmer steel prices and trade protection measures that are reducing import pressure, Fitch Ratings said on Tuesday.

The ratings agency said demand from infrastructure, housing and manufacturing activity is supporting earnings and helping steel producers absorb higher input costs. It expects Indian steel margins to remain relatively resilient despite rising production costs.

“Indian steelmakers’ credit profiles remain supported by strong domestic demand, firmer pricing and trade measures that are reducing import pressure,” Fitch said.

Domestic demand supports margins

Steel demand growth was around 8% in the second quarter of 2026, supported by infrastructure, housing and manufacturing activity, Fitch said. It expects finished steel consumption to continue rising over the next few years, providing a favourable operating environment for steel producers.

At the same time, coking coal and energy costs have increased following supply shocks and higher energy prices linked to the Iran conflict. However, steelmakers have largely offset the higher input costs through higher steel prices, helping preserve margins and sustain earnings momentum.

“Strong domestic demand is supporting this margin resilience,” Fitch said.

Trade protection is also supporting domestic market conditions. The 12% safeguard duty on certain steel imports has helped domestic producers, while lower Chinese exports to India have contributed to firmer local steel prices.

However, Fitch said imports remain the main risk to profitability. A resurgence in imports could increase competitive pressure and weigh on steelmakers’ margins.

Capacity expansion to continue

The agency expects India’s crude steel capacity to increase by almost 40 million tonnes in 2026 and 2027, while finished steel consumption is also expected to grow steadily.

“Capacity expansion and strategic projects remain a feature of the sector despite elevated capital spending,” Fitch said.

JSW Steel, which has a BB+/Positive rating, is targeting around 40% capacity growth over the next four years. The company has also announced a joint venture with South Korean steel major POSCO to develop a 6 million-tonne-per-annum integrated steel plant.

Fitch said stronger issuers are best positioned to translate favourable industry conditions into credit improvement. It noted that JSW Steel’s recent rating upgrade reflected higher EBITDA, stronger expected margins and debt reduction following the sale of Bhushan Steel assets into a joint venture with Japanese steelmaker JFE Steel.