Fitch Ratings has said that spending by the Indian government on infrastructure will be the catalyst for any meaningful improvement in domestic steel demand. The agency said in a report expects India’s steel consumption to improve modestly by 7%-8% in 2016.
High imports and soft steel prices globally in 2016 are likely to result in continuing profitability pressures for Indian steel producers. Their margins are likely to be lower in 2015, and improve marginally in 2016, supported by improving domestic demand and the imposition of safeguard duty on imports on certain steel products for 200 days, the report said.
Fitch has a Negative Rating Outlook on the sector.
The ratings agency said it expects the leverage of major Indian steel producers to remain high in 2016, and start to decrease meaningfully only by 2017. The debt levels of major Indian steel producers increased over the last three years due to capacity expansions. The high debt, along with profitability pressure, is likely to result in deterioration of leverage in 2015.