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Sluggish demand weighs on Indian steel sector, pulls down prices

An early onset of monsoon, coupled with sluggish demand and a correction in Chinese steel prices, is weighing on the Indian steel sector. Prices of hot rolled coil (HRC), a benchmark for flat steel, that were hovering around Rs 46,600 per tonne in January, started moving up in the run-up to the imposition of a provisional safeguard duty of 12 per cent on steel imports into India. Data from price reporting and market intelligence firm BigMint showed that the monthly average HRC price ex-Mumbai as on 29 April 2025 was Rs 52,900 a tonne. But as of 24 June, the trade-level (distributor to dealer) price was down by about 4 per cent. Distributors are currently facing a period of weakened demand, characterised by a noticeable decline in enquiries and a slower conversion rate of these enquiries into confirmed sales, BigMint explained. In long steel, trade-level blast furnace rebar prices declined by Rs 1,300 per tonne week-on-week to Rs 51,900 per tonne ex-Mumbai, as per BigMint's assessment on 20 June 2025. In the projects segment, prices declined further to Rs 51,000–51,500 per tonne for Mumbai, weighed down by continued bid-offer disparity and subdued construction activity due to the ongoing monsoon season, according to the firm. While weak market sentiment in the wake of the monsoon is influencing long steel prices, HRC, a global commodity, is being driven by international prices and geopolitical challenges, apart from slowing demand. Pressure points Steel producers cited multiple factors for the current weakness in prices. Monsoon aside, the underlying demand environment is seeing an impact from various factors, Ranjan Dhar, Director and Vice-President – Sales and Marketing at ArcelorMittal Nippon Steel India (AM/NS India), said. 'Exports by the industry are also limited, leading to extra material in the domestic market. Trade diversion in the wake of tariff action in the US is playing out – one or two Chinese cargoes have landed in India at lower prices and some bookings have happened from Russia where demand is tepid,' he added. Another major steel producer said demand from the infrastructure segment was weaker due to liquidity issues and the monsoon. Passenger vehicles were in the slow lane and consumer durables were affected by the early monsoon, said the producer. Slowing demand Apparent steel consumption fell to 10.93 million tonnes (mt) in April 2025, down from 12.96 mt in March and 11.29 mt in February, data sourced from BigMint showed. ICRA Vice-President Sumit Jhunjhunwala said steel demand growth was projected to moderate to around 7–8 per cent in FY26, as the Government of India's capital expenditure momentum in steel-intensive sectors such as railways and roadways was expected to soften from the peak investment levels seen during FY21–FY24. 'Demand growth had eased to 11.5 per cent in FY25, down from a robust 13.7 per cent in FY24,' he added. China factor The spectre of China is also looming large. AM/NS India's Dhar pointed out that China reduced its production from January to May by 1.7 per cent versus last year. 'Their domestic consumption is also down, but exports are up 8–10 per cent from last year. That is worrisome for India and needs more protection as the Indian steel industry is in an investment cycle. And investment cannot be stressed.' Chinese steel prices were also a dampener. Following the announcement of the safeguard duty (SGD), monthly steel imports began to decline sequentially from February 2025, Jhunjhunwala noted. 'However, with Asian steel prices trending lower, the risk of a rise in imports from the prevailing low levels remains a possibility. Chinese HRC prices have corrected by almost $20 per tonne since March 2025,' he added. Steel spreads Iron ore prices saw a downward revision at the beginning of June on account of growing inventory in the domestic market and declining exports, observed Satnam Singh, Senior Practice Leader and Director, Crisil Intelligence. On steel margins, he said they were expected to remain range-bound with a positive bias, as any expansion due to the imposition of safeguard duty would be set off by the correction in steel prices on account of the early monsoon. A Motilal Oswal report mentioned that premium hard coking coal prices (CNF Paradip, India) remained range-bound at $180–200 per tonne due to weak global demand. Average coking coal prices improved 5 per cent month-on-month to $206 per tonne in May, led by monsoon-led restocking. Dhar said demand was expected to improve after the monsoon when infrastructure and construction activities pick up. 'The RBI cutting interest rates by 50 basis points should further support urban demand.'