Nomura has maintained a bullish outlook on the Indian steel sector, citing a recent recovery in domestic prices. While rising coking coal costs remain a concern for production margins, analysts believe government safeguard duties will help protect profitability. Investors may track whether domestic demand remains strong enough to offset the ongoing input cost pressure.
The Indian steel sector is seeing a positive trend as of September 2026, according to a recent report by Nomura. The brokerage has reaffirmed its bullish stance, noting that domestic demand and structural growth are helping the industry recover from a correction that occurred during the monsoon months of June and July.
Price Recovery in Steel Products
Recent market data shows that steel prices have started to climb back up. Domestic rebar prices have rebounded to approximately ₹53,900 per tonne, while hot-rolled coil (HRC) prices have shown resilience, trading in the range of ₹58,800 to ₹60,450 per tonne. This recovery is a welcome sign for steelmakers, who faced downward pressure on pricing earlier in the year. The price increase is largely attributed to stabilizing domestic demand, which analysts view as a key indicator of the sector's underlying strength compared to global markets.
Managing Raw Material Costs
Despite the improved pricing, steel manufacturers are dealing with significant cost pressure. The price of imported coking coal—a critical raw material used in steel production—has surged by 25% year-to-date in 2026. Because India imports roughly 95% of its coking coal requirements, this price spike directly impacts the cost of production.
When input costs like coking coal rise, they can squeeze the profit margins of steel companies. However, Nomura’s report suggests that the Indian industry is better positioned than some of its international peers. Domestic price hikes implemented earlier this year are helping companies absorb a portion of these inflationary pressures, though the extent of this cushion depends on how long raw material prices stay elevated.
Regulatory Protection and Market Risks
The government’s policy on imports acts as a significant buffer for the industry. Current safeguard duties, which stand at 11.5% and are set to taper to 11% by 2028, help prevent a flood of cheaper steel from flooding the domestic market. This protection is vital for maintaining pricing power.
However, the sector is not without risks. Investors should remain mindful of broader challenges, including supply chain volatility caused by geopolitical tensions, which can influence commodity prices rapidly. Additionally, there are operational concerns, such as potential coal supply deficits for power-intensive industries, which could lead to energy cost spikes. Another monitorable risk is the possibility of increased steel imports from countries like China, even with duties in place, if global demand slows significantly.
Going forward, the key factor for investors will be to monitor the balance between domestic steel demand and raw material costs. Future reports on import volumes and international coking coal price trends will provide clarity on whether the current margin cushion is sustainable.