ICRA: Steel's $115/Tonne Margin Rests on Tariff Shield

ICRA's sector head Sumit Jhunjhunwala frames the Indian steel market as resilient but not insulated. Domestic demand is holding at 8–9% growth into FY2027, yet the pricing floor is thinner than the safeguard duty suggests. For EPC and infrastructure buyers, that distinction drives procurement timing and escalation risk.

The tariff math

In July 2026, domestic hot-rolled coil traded at a $28–30/tonne discount to Chinese prices. The safeguard duty on select products offered effective protection of $50–55/tonne. Without it, ICRA argues, Chinese landed costs would undercut domestic realisations. Still, finished steel imports rose 37% year-on-year to 2.77 million tonnes in April–July FY2027, making India a net importer despite three-year measures.

Coking coal is the swing factor

Coking coal is roughly 40% of raw material cost for primary producers. Import dependence means global coking coal prices, not domestic demand, can reset spreads. ICRA expects industry OPBDITA of about $115/tonne in FY2027, up from $106/tonne in FY2026, but only on stable raw material costs and continued trade protection.

The structural shift

Bank debt fell to $176 per tonne of installed capacity in March 2026 from a $450 peak, while operating margins improved to 14.8% in FY2026. That deleveraging lets producers absorb cyclical shocks, but it also means credit quality now hinges on cost discipline and trade policy rather than demand alone.

The Production Linked Incentive scheme for specialty steel and safeguard measures underwrite medium-term competitiveness, yet producers such as SAIL and private mills still face Chinese pricing in export markets.

Global overhang and buyer implications

The World Steel Association sees global demand bottoming out at 0.3% growth in CY2026 before a 2.2% recovery in CY2027. China's 119 million tonnes of CY2025 exports remain the overhang, and CBAM will gradually reprice low-carbon steel.

For infrastructure buyers, the signal is to:

- Lock steel pricing around trade-policy dates.
- Hedge coking coal-linked escalation.
- Treat tariff protection as variable, not permanent.