The consolidated debt of the national steel industry fell to a nine-year low of Rs 2 lakh crore at the end of July 2021, the rating agency Icra announced on Thursday, revising the outlook for the sector to “stable” to “positive”.
“Given strong earnings growth and reduced investment following pandemic uncertainty, steelmakers began to aggressively deleverage since the second quarter of fiscal 2021.” said Icra.
Consolidated industry borrowings are now at their lowest level since March 2012.
“A closer look at the industry’s consolidated borrowings per metric ton of installed capacity, it stood at $ 180 in July 2021, down almost half from $ 350 in November 2008. This suggests that domestic steel companies are now significantly less indebted than in FY’2009, when the last steel supercycle ended, following the global financial crises, ”he said.
The agency said that, benefiting from a weak base and improved demand from several steel-consuming sectors, domestic consumption is expected to grow by around 12% in the current fiscal year. During the last financial year, consumption fell by 7% compared to the previous year. “Steel production growth in fiscal year 22 is expected to be higher, at around 14%, taking advantage of the upward trend in net finished steel exports,” said Jayanta Roy, vice -Senior President and Group Leader, Corporate Sector Ratings, Icra.
“Our assessment indicates that net exports are expected to increase to around eight million tonnes (MT) in the current year, up from six (MT) in FY 21, as domestic factories attempt to increase. their export footprint, given the ability to fill the void left by Chinese factories due to government restrictions, ”Roy added.
On the supply front, from JSW Steel and NMDC, eight MT of new capacity is expected to hit the market during the current year to bring the installed capacity to 150 MT, but the same is expected to be absorbed by one. additional steel consumption of 12 MT. expected in FY’22. This will lead to revising the capacity utilization rates in the industry to 78% in FY’22 against 72% in FY’21. Within this framework, however, the main factories are expected to operate at significantly higher capacity utilization.