India’s steel industry is grappling with mounting challenges as cheap imports from China and aggressive global tariff policies put pressure on domestic prices and profitability. Leading steelmakers, including Tata Steel and JSW Steel, are facing reduced rating headroom, as highlighted by Fitch Ratings in its latest report.
The influx of discounted steel imports from China has surged, with shipments reaching record highs between April and December 2024. This trend has been exacerbated by China’s economic slowdown, which has led to increased exports to countries like India. As a result, Indian steelmakers are contending with declining margins, despite robust domestic demand fueled by infrastructure and industrial growth.
Fitch Ratings has downgraded the outlook for Tata Steel and JSW Steel, citing concerns over their financial leverage. Tata Steel’s rating stands at BBB-/Negative, while JSW Steel is rated BB/Stable. Both companies are expected to breach their negative sensitivity thresholds for EBITDA leverage in FY25, with JSW Steel surpassing 3.7x and Tata Steel exceeding 3.0x.
The Indian government is exploring measures to mitigate the impact of cheap imports, including the potential implementation of safeguard duties. However, the timing and effectiveness of such interventions remain uncertain. Fitch anticipates some relief in FY26, driven by sustained domestic demand growth and a decline in input costs, but margins are expected to remain below mid-cycle levels.
Industry experts emphasize the need for strategic policy decisions to protect domestic steelmakers while balancing the interests of consumers. As the global trade landscape evolves, India’s steel giants must navigate these challenges with resilience and adaptability.
Sources:
[1] A China problem is hampering rating headroom of India’s steel giants https://economictimes.indiatimes.com/industry/indl-goods/svs/steel/a-china-problem-is-hampering-rating-headroom-of-indias-steel-giants-tata-steel-jsw-steel-share-price/articleshow/119144222.cms?from=mdr