Domestic Stainless Steel Demand To Increase At A Healthy Rate Until FY25: Crisil Ratings

Domestic stainless steel consumption will grow at a compound annual growth rate (CAGR) of 9 per cent until the fiscal year 2024-25, according to Crisil Ratings, 

Domestic demand for stainless steel was 4 million tonnes (MT) in fiscal 2021-2022, according to a study released on Thursday by the rating agency. “Domestic demand for stainless steel is projected to log a healthy compound annual growth rate of 9 per cent in the three fiscal years through 2025, more than doubling the 4.5 per cent pace of the previous five fiscal years,” according to the Crisil Ratings report.

The growing adoption of stainless steel in railways, which is a focal area for government infrastructure spending, as well as rising application in the automotive and construction sectors, will drive demand. Demand increase, in turn, will drive capacity expansion. However, given stable profit levels and healthier balance sheets, players' credit profiles are anticipated to stay comfortable.

"Stainless steel is becoming more popular due to its increased durability and low maintenance. Railway demand is anticipated to more than triple by fiscal 2025, accounting for 20 per cent of incremental demand for the metal between fiscal 2023 and fiscal 2025. To be sure, the recent Union Budget has more than doubled the amount earmarked for manufacturing railway coaches to Rs 47,500 crore for fiscal 2024," Ankit Hakhu, Director, CRISIL Ratings said.

Other major sectors using stainless steel, such as consumer products (45 per cent of demand) and the process industry (25 per cent), are expected to grow at a healthy rate of 7-9 per cent over the next 3-5 fiscal years, owing to higher consumer spending and a recovery in consumption.

Strong demand prospects, combined with the lack of any significant supply additions in the previous three fiscal years, have set the scene for capital expenditure (capex). Domestic manufacturers are investing in capital improvements to add 1 MT of steel melting capability by fiscal 2024.

Between fiscal 2009 and 2012, the sector gained 1.3 MT, after which utilisation and profitability issues caused a period of stress buildup. “This time, the agency stated that it believes the risk outlook is more favourable,” it added.