Indian Ratings and Research (Ind-Ra) revised its forecast for the Indian steel sector for the current budget, based on fears of rising cool demand in the near future. The rating agency downgraded the steel sector rating to stable-negative. He also revised downward the forecast growth in demand for steel from 7% to 4%.
In a statement released by the agency, it was noted that low expectations of rising demand for steel in the country due to uncertainty in various sectors of final consumption, including the automotive, construction and real estate sectors, forced it to lower its forecast. The revision is also due to a slowdown in global growth and continued trade tensions between different countries around the world, which negatively affected steel supplies.
The country's domestic steel sector is likely to face strong pressure from rising imports, especially from countries such as South Korea and Japan, due to a free trade agreement with these countries. A delay in iron ore mining auctions in the country could affect the availability of steelmaking materials. In addition, this could lead to a further increase in raw material costs, Ind-Ra noted.
The rating agency predicts a decline in sales in the second quarter of the fiscal year 2019-20. Margin is also expected to remain squeezed, as in previous quarters. Nevertheless, an increase in government spending on infrastructure and improving market sentiment can help restore steel demand in the second half of the fiscal period.
