Analysts and industry executives predict that India’s steel demand will decrease in the next fiscal year, which begins in March, due to a massive general election that will postpone government projects and infrastructure expenditure.

 Consistent government expenditure on infrastructure projects turned India, the world’s second-largest crude steel producer, into one of the alloy’s fastest-growing markets, even as global demand slowed.

 Steel demand, however, is forecast to expand at a slower 7%-10% in the fiscal year 2024-25, compared to a predicted 11%-12% growth in the current year to March 2024, according to experts and industry officials.

The incumbent Bharatiya Janata Party of Prime Minister Narendra Modi will seek a third term in the next general elections in early 2024. For weeks, India’s general elections, the world’s biggest democratic exercise, are held with staggered voting.

“We expect finished steel consumption in India to increase by 9% in FY25, following a 12% rise in FY24,” Fitch Ratings said in a report.

However, it said that India will continue to be the primary growing market for steel internationally.

Between April and October, finished steel consumption reached a five-year high as building activity increased and the vehicle industry exhibited strong demand.

The construction industry expanded 13.3% year on year in the July-September quarter and 7.9% from the previous quarter to June 2023, the greatest growth rate in five quarters.   

According to Puneet Paliwal, an expert at London-based CRU Group, the construction industry has been the primary driver of India’s steel market.

“This government capex-led steel demand growth is not expected to sustain in 2024,” Paliwal said, adding that this would be especially true in the first half of next year due to planned government expenditure cuts.

Steel imports have also been steadily increasing in India, with shipments reaching a four-year high between April and October, according to official statistics.

While the steel sector has requested steps to limit imports, the government has said that it would keep an eye on the issue.

In addition to growing imports, India’s steel mills are dealing with greater raw material prices, which industry insiders warn would worsen their woes.

Metals have been a key motivator of industrialization. Steel has long had a leading position among metals. Steel production and consumption are commonly viewed as markers of economic success as a raw material and intermediate product. 

As a result, it is not an exaggeration to claim that the steel sector has always been at the forefront of industrial progress and is the backbone of every economy.