Ind-Ra Maintains Negative Outlook on Steel Sector

India Ratings and Research (Ind-Ra) has maintained a negative outlook on the steel sector and expects an operational recovery to pre-Covid-19 levels in second half of FY22, though large players could recover earlier. While the domestic demand did show initial signs of recovery in mid-Q2FY21, with the unleashing of pent-up demand, its sustenance would depend on a macroeconomic pick-up from timely government reforms and stimulus to push up domestic consumption and investment activity, said the ratings agency. Also, government’s increased investments in infrastructure, especially frontloading of the Rs 100 trillion infrastructure investment plan could be a key steel demand growth driver, it said. The liquidity position of large integrated players is likely to remain adequate, while already stressed mid-sized and secondary steel producers would face elevated liquidity stress, it said. Ind-Ra believes that iron ore prices could increase further with only five out of the 19 Odisha iron ore mines, which were auctioned in March 2020, being operational as on date.