New Delhi: As India's steel demand remained robust in May, surging nearly 9 per cent on YoY, industry capacity utilisation is expected to stay above 90 per cent in the medium term, as per a report by Kotak Institutional Equities.
Domestic steel demand grew 9 per cent year-on-year in May 2026 and 8.7 per cent in FY26-to-date, following 7.6 per cent growth in FY26 after four consecutive years of double-digit expansion. It further noted "exports increased 30 per cent YoY, on a weak base, to 0.5 million tons, but were outpaced by imports of 0.7 million tons in May 2026."
According to the report, primary rebar prices have fallen by around Rs 7,000 per tonne, or 11 per cent, from their April 2026 peak. Meanwhile, domestic hot-rolled coil (HRC) prices have remained relatively stable, declining by only Rs 1,600 per tonne, or 2-3 per cent, amid seasonal weakness in the steel sector.
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Additionally, HRC prices are still trading at a 7 per cent discount to China's import parity levels, limiting the risk of further declines. "Weak steel spreads in China due to cost inflation improve odds of higher regional prices going ahead," it added.
The report noted that spot hard coking coal prices are 4 per cent higher than fourth-quarter FY26 levels, while global iron ore prices have largely remained range-bound. Additionally, the NMDC iron ore fines prices have increased by about 20 per cent as against March 2026 exit on higher domestic steel prices in 4QFY26.
"We expect industry utilization to remain above 90% in the medium term, led by a robust demand CAGR of ~7% over FY2026-29E, outperforming capacity additions," it said.
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Furthermore, margins will likely improve on QoQ as a "portion of the sharp 14%/21% increase in trade prices in 4QFY26 gets reflected in 1QFY27E. This should more than offset the increase in coal and ore prices, leading to higher qoq margins for our ferrous coverage," the report added.
