- Crude steel output rises 8%, while consumption growth slows to 6%
- Steel exports surge by 34%, narrowing trade deficit despite higher imports
- BigMint’s Composite Index climbs 9% on higher costs, policy support
Morning Brief: India’s steel industry remained resilient in H1CY’26 as it faced a major stress test with the Middle East conflict triggering a sharp rally in crude oil and natural gas prices, lifting freight and energy costs across the steel value chain.
Steel production and consumption increased in H1CY’26, albeit at a slower pace, while exports surged. Although imports rose, steel prices recovered to near three-year highs — a divergence from H1CY’25 when prices hovered near four-year lows as steelmakers struggled to gain pricing power amid elevated volumes of low-priced imports.
Steel industry highlights in CY’25
Steel production rises 8%, consumption growth slows to 6%
India’s crude steel production rose 8% y-o-y to 87 million tonnes (mnt) during H1CY’26, slowing marginally from the 9% growth recorded in the year-ago period. Parallelly, finished steel production increased by 8% to 84 mnt.
While rapid capacity growth and policy support continued to drive crude steel production higher, the pace softened. A blast furnace relining at one of the country’s largest steelmakers, production disruptions following fatal accidents at several integrated mills, and higher coking coal and energy costs curbed output.
Provisional Joint Plant Committee (JPC) data shows that after the US-Iran conflict broke out in end-February, India’s crude steel production grew merely 3% in Q2CY’26 to 42.1 mnt.
However, consumption growth slowed to 6% in H1CY’26 compared to 10% in H1CY’25. The spike in crude oil prices pushed up freight and operating costs, delaying manufacturing production schedules and lifting the cost of project execution.
To illustrate, FICCI’s manufacturing survey showed the share of firms reporting higher or unchanged production dropping to 77% in Q1FY’27 from 93% in the previous quarter, signalling softer industrial activity. Demand from the construction sector also softened amid weak housing activity, labour shortages, and heatwaves.
Public investment, however, remained a bright spot, with capital expenditure by 63 central public sector enterprises rising 26% y-o-y to INR 2.1 trillion in April-June 2026, equivalent to 25% of their FY’27 target and higher than the 22% achieved of the target in Q1FY’26.
Steel trade deficit shrinks as exports surge
India’s steel trade deficit shrank to just over 0.25 mnt during H1CY’26, contracting markedly from over 0.7 mnt a year ago.
Steel exports rose 34% y-o-y to 3.95 mnt after falling 24% in H1CY’25. While exports to the EU, the largest market for Indian exporters, were constrained, as buyers largely stayed out of the market ahead of the revised safeguard regime that came into force on 1 July. Uncertainty over lower Indian allocations, higher out-of-quota duties, and additional compliance requirements under the Carbon Border Adjustment Mechanism (CBAM) delayed purchasing decisions.
Consequently, Indian exporters turned to Vietnam and the Middle East, where demand was stronger, supply was tight due to the absence of Iranian steelmakers, and restrictions or duties existed on the entry of Chinese steel. In fact, as per bulk vessel line-up data, the top importing countries of Indian hot-rolled coils (HRCs) were Vietnam and the UAE.
Meanwhile, imports rose more slowly by 12% to 4.2 mnt despite the safeguard duty on flat steel imports. Earlier, imports had fallen 14% y-o-y in H1FY’25.
While the safeguard duty helped protect producers from price undercutting, HRC imports rose due to procurement under the Advance Authorisation Scheme. Export-oriented pipe and tube manufacturers had ramped up Chinese imports under the Advance Authorisation Scheme, which allowed them to avoid the safeguard duty and BIS quality norms that would ordinarily apply to steel reaching the domestic market. As such, Chinese HRC imported under the scheme turned commercially viable in April-May.
India Steel Composite Index rises 9% y-o-y
BigMint’s India Steel Composite Index, a barometer of Indian steel price movements, increased by 9% to 145 points in H1CY’26. The index made a dramatic recovery in H1CY’26, peaking near three-year highs in April 2026 after falling to a five-year low in November. This is in stark contrast to the 6% drop in H1CY’25, when the index was at around a four-year low.
It should be noted given that consumption growth slowed in H1CY’26, higher input costs and policy support, rather than a rebound in demand, sparked the price surge. Regulatory support included the official implementation of the safeguard duty on flat steel imports and a provisional anti-dumping duty on met coke imports.
The announcement of these coincided with the demand rebound ahead of the fiscal year-end, which allowed tier-1 mills to undertake successive price hikes to pass on higher raw material costs.
Subsequently, the US-Iran conflict and resulting disruptions to gas supply gave rise to supply concerns and prompted panic-driven restocking. As April arrived, geopolitical tensions eased, and buyers began to resist the higher prices. Elections in key states, labour shortages, and the approaching monsoon also weighed on steel prices in May and June.
In contrast, the index trended lower through most of H1CY’25 due to elevated imports and weak global prices, with only a brief recovery in March on fiscal year-end buying and the proposed safeguard duty. Prices softened again thereafter, as the provisional safeguard supported flats, but long steel came under pressure from slowing construction activity and the early onset of the monsoon.
Raw materials
Iron ore production jumps but imports surge too, exports recover
India’s iron ore production rose 18% y-o-y to 184 mnt in H1CY’26, more than twice the pace of crude steel production growth. Higher mining capacity and aggressive production ramp-ups by miners, particularly NMDC and Lloyds Metals and Energy (up 26% and 53% y-o-y, respectively in Q2CY’26), drove the increase.
Amid stronger domestic production, iron ore exports, including of pellets, increased 11% y-o-y to 15.5 mnt. A subdued domestic spot market in Q2 prompted miners to tap export opportunities as higher international iron ore prices improved realisations. Demand strengthened too, as Chinese mills focused on building inventories. Meanwhile, the depreciation of the Indian rupee against the US dollar enhanced export competitiveness.
However, stronger production failed to stem imports, which surged 29% y-o-y to 6 mnt. Demand for high-grade, low-impurity ore remained firm as integrated mills sought to improve blast furnace efficiency, while competitive cargoes from Brazil and South Africa, logistical bottlenecks in Karnataka, and higher domestic ore prices supported imports.
Coal production drops, so do imports
Domestic coal production slipped 3% y-o-y to 554 mnt amid operational issues at key Coal India subsidiaries. However, dispatches remained healthy, as Coal India entered FY’27 with elevated pithead stocks, ensuring ample fuel availability across the power sector.
Against this backdrop, thermal coal imports fell 12% y-o-y to 78 mnt despite record peak power demand during the summer. Strong domestic coal supply, a surge in renewable power generation, and higher seaborne coal and freight costs reduced the need for imported cargoes.
Metallurgical coal imports, meanwhile, edged up 1% y-o-y to 41 mnt as higher blast furnace output kept demand firm despite elevated prices. However, the rise was largely concentrated in coking coal, whose imports grew 14% y-o-y to 34.7 mnt. Meanwhile, mills reduced procurement of pulverised coal injection (PCI), with imports down 40% at 6.3 mnt, likely amid weaker economics for PCI relative to coal or optimisation of PCI injection rates.
Scrap imports decline amid higher costs, generation surges
Scrap imports fell 40% y-o-y to 3.2 mnt as a weaker rupee and higher freight costs lifted landed costs, and alternatives such as sponge iron and domestic scrap remained cheaper. Supply also tightened in key exporting markets, particularly the US, where stronger domestic steel production supported local scrap demand and reduced export availability.
Additionally, domestic scrap generation jumped 32% y-o-y to 20 mnt as more vehicle scrappage centres became operational and collection networks expanded. Improved local availability allowed steelmakers to rely less on overseas supplies, especially given higher landed costs.
Outlook
Overall, the biggest takeaway from H1CY’26 is that India’s steel industry proved capable of sustaining growth despite a sharp external cost shock. Similarly, while capacity additions and public infrastructure spending are expected to keep steel production on an upward trajectory in H2CY’26, demand may remain softer than CY’25 as manufacturers continue to face headwinds from elevated energy costs, supply chain disruptions, a weak monsoon, and global trade uncertainty.
Trade dynamics may also emerge as a hurdle. The revised EU safeguard regime and the phased implementation of the Carbon Border Adjustment Mechanism will reduce exports to the EU, though India will remain a key exporter there. Indian mills will need to further ramp up shipments to Southeast Asia and the Middle East to compensate for this loss.
Meanwhile, an anti-dumping investigation into hot-rolled flat steel imports from China, Japan, and Russia is expected to keep domestic flats prices supported, while long steel remains dependent on cyclical construction-related trends.
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