Steel Profitability to Hold Strong: Crisil Forecasts Rs 11,000/T Profit

Primary steel manufacturers in India are projected to sustain an operating profitability of Rs 10,500-11,000 per tonne in the current fiscal year, FY27. This forecast from Crisil Ratings indicates stability despite rising input costs, buoyed by higher global steel prices and continued protection from safeguard duties.

Favourable market pricing, coupled with healthy domestic demand growth, is expected to strengthen cash accruals for these producers. This environment will also support necessary capital expenditure requirements while helping maintain stable credit profiles across the sector.

Rising Input Costs Challenge Profitability

The cost of production for primary steel producers, primarily those utilizing the blast furnace-basic oxygen furnace (BF-BOF) route, is estimated to increase significantly this fiscal. Crisil projects a rise of approximately Rs 2,000 per tonne, pushing costs to Rs 53,000-54,000 per tonne.

This increase is largely driven by higher coking coal prices, which constitute nearly 40% of overall production costs. Coking coal is anticipated to become 5-7% more expensive due to potential supply disruptions in key exporting regions and sustained demand from major steel-producing nations.

Additional cost pressures stem from elevated logistics, shipping, and insurance expenses, alongside increased power and fuel costs. These factors collectively contribute to the challenging operational environment for steelmakers.

Market Dynamics Offer Support

Despite the escalating cost pressures, Crisil expects these challenges to be offset by several key market dynamics. Higher steel prices, the ongoing 11.5% safeguard duty, and robust domestic demand growth are crucial in maintaining steady profitability.

Domestic steel prices are projected to increase by 6-8% during the current fiscal year. This price growth is a critical factor in mitigating the impact of rising input costs.

Furthermore, domestic steel demand is expected to remain healthy, growing 5-7% this fiscal year, building on the strong base established in fiscal 2026. This growth is underpinned by sustained investments in infrastructure projects and robust demand from the automotive, engineering, and construction sectors.

The combination of these supportive factors is set to ensure primary steelmakers navigate the current cost environment effectively. Their ability to maintain profitability levels underscores the resilience of the sector amidst fluctuating global and domestic market conditions.