Domestic demand for stainless steel, which was ~4 million tonne (MT) in fiscal 2022, is projected to log a healthy compound annual growth rate of ~9% in the three fiscals through 2025, double the ~4.5% pace of the past five fiscals.
This will be driven by increasing adoption of stainless steel in railways — a focus area for government infrastructure spending — and rising application in the automobile and construction sectors.
The demand growth, in turn, will spur capacity additions. However, credit profiles are expected to remain comfortable, given stable profit levels and healthier balance sheets.
Says Ankit Hakhu, director, Crisil Ratings, “Adoption of stainless steel is increasing because of its higher durability and lower maintenance. Demand from railways is expected to more than triple by fiscal 2025 and constitute ~20% of incremental demand for the metal over fiscals 2023-2025. To be sure, the recent Union Budget has doubled the amount earmarked for manufacturing railway coaches to ~Rs 47,500 crore for fiscal 2024.”
Says Ankush Tyagi, associate director, Crisil Ratings, “Capex will be supported by two factors. First, balance sheets are strong as no material capacity expansion has taken place in the industry over the past few years. Second, cash accruals will remain healthy as operating margins are expected to be steady given the conversion nature of business and reducing share of high nickel stainless steel grades in the overall demand mix. This will result in lower dependence on debt.”
