New Delhi [India], August 25 : India's steel industry is likely to see a volume-led recovery in the second half of FY27, supported by lower input costs, easing maintenance disruptions and strong domestic demand, according to Yes Securities Institutional Equities.
The brokerage said Indian steel producers continue to benefit from strong domestic fundamentals, with industry growth expected to reach up to 9 per cent in FY27.
Steel demand is also expected to improve further after the monsoon season.
"H2FY27 recovery to be led by volumes and lower input costs Management commentary across steel producers remained constructive on the medium-term outlook despite expecting a seasonally softer Q2FY27," it said.
The report further noted that capacity utilisation remains robust across steel producers, with major expansion projects, debottlenecking initiatives and downstream investments progressing as planned.
However, it flagged - import trends, particularly from China, Japan and Russia - remain a key monitorable, although the sector has also continued to benefit from the 12 per cent safeguard duty.
Also, there is a possibility of domestic steel realisations softening marginally in Q2FY27, but lower coking coal costs from August coupled with the normalisation of maintenance shutdowns and continued cost optimisation may support profitability and margins.
"Overall, the investment narrative remains centred on volume recovery in H2FY27, declining raw material costs, downstream value addition and disciplined capital allocation, while sustained domestic steel demand and execution of ongoing expansion projects will be the key determinants of earnings growth," the report noted.
Apart from steel, the brokerage house remains constructive for "non-ferrous" players. "Management commentary across the non-ferrous space remains supported by a favourable outlook for aluminium, zinc and silver prices," it said.
As per the report, the industry may face supply-side disruptions, including the closure of the Mozal smelter and ongoing geopolitical tensions, to keep the global aluminium market in deficit, supporting prices through the remainder of FY27.
Overall, "supportive metal prices, structural cost advantages and capacity expansion will remain the key earnings drivers over the medium term," it noted.