Primary steel makers to absorb cost pressures, maintain profitability

Mumbai, August 6, 2026: The operating profitability of primary steel producers, measured by Ebitda1 per tonne, is expected to remain resilient at Rs 10,500-11,000 per tonne this fiscal despite rising cost pressures.
Higher global steel prices and the effect of safeguard duty2 imposed last year will help keep profitability steady. This, coupled with healthy demand growth, is expected to strengthen cash accruals and support capex requirements while sustaining stable credit profiles.
A Crisil Ratings study of eight primary steel manufacturers, which accounted for around half of India’s total steel output last fiscal, indicates as much.
The cost of production for primary steel producers – producers of steel predominantly through BF-BOF4 route - is projected to rise by around Rs 2,000 per tonne this fiscal, to Rs 53,000 – 54,000 per tonne, owing to higher coking coal prices and elevated logistics and energy costs.
Coking coal, which accounts for nearly 40% of production costs, is expected to become 5-7% costlier amid potential supply disruptions in key exporting regions and sustained demand from major steel producing countries. Higher freight, shipping and insurance costs, along with elevated power and fuel expenses, will further add to cost pressures.
Says Ankit Hakhu, Director, Crisil Ratings, “Higher global steel prices, continued protection under the 11.5% safeguard duty and healthy domestic demand growth are expected to support a 6-8% increase in domestic steel prices this fiscal. This will offset rising cost pressures and keep profitability steady. Notably, Ebitda per tonne is projected to remain broadly in line with the decadal average of around Rs 10,500 per tonne.”
Domestic steel demand is expected to remain healthy, growing 5-7% this fiscal on the high base of fiscal 2026, supported by sustained investments in infrastructure and robust demand from the automotive, engineering and construction sectors. The long-term demand outlook also remains strong, with steel consumption expected to grow 6-8% annually, aided by India’s low per capita steel consumption of around 109.2 kg in 2025, which was significantly below the global average of 209 kg.
The favourable long-term demand outlook continues to drive capacity expansion across the industry, including investments in value-added products and backward integration initiatives such as the development of captive mines and power plants. Primary steel producers are expected to incur capital expenditure (capex) of Rs 75,000-80,000 crore this fiscal, higher than the approximately Rs 70,000 crore spent last fiscal.
Says Snehil Shukla, Associate Director, Crisil Ratings, “Capex intensity, measured as the ratio of annual capex to Ebitda, is likely to remain moderate at 1.35-1.40 times this fiscal, lower than the decadal average of around 1.75 times since 2017. Healthy domestic demand and steady operating profitability should drive strong cash accruals, supporting ongoing capex. Consequently, nearly three-fourths of the planned capex is likely to be funded through internal accruals, with the balance funded through debt.”
As a result, leverage is expected to improve modestly, with the net debt-to-Ebitda ratio declining to around 2.6 times by the end of this fiscal from around 2.8 times at the end of last fiscal.
However, the conflict in West Asia remains fluid and warrants close monitoring, given its potential to disrupt supply chains and increase costs.