BofA Securities Projects Near-Term Challenges for India's Steel Sector Amidst Rising Raw Material Costs

Bank of America (BofA) maintains a cautious stance on India's steel industry for 2024, citing elevated raw material expenses.

Bank of America Securities has reaffirmed its cautious outlook on India's metals and mining sector, particularly focusing on steel companies. In a recent report, the foreign brokerage firm highlighted the challenges expected to confront the industry in the near term, attributed to higher raw material costs and weakened demand from China.

The report emphasized the current constraints posed by elevated raw material prices, notably coking coal, coupled with sustained weakness in the Chinese market. According to BofA Securities, these factors are likely to keep domestic Hot Rolled Coil (HRC) prices rangebound in the coming months.

Despite these short-term hurdles, the analysts at BofA Securities acknowledged the long-term potential benefits for large Indian steel players. They anticipate that stronger volume growth, reduced capital expenditure intensity, and robust balance sheets could offer advantages in the long run.

"While stronger volume growth, lower capex intensity, and robust balance sheets should benefit large Indian steel players in the long term, we remain cautious in the near-term, given elevated raw material costs especially coking coal, and continued weakness in China with the property market likely to remain weak," the report stated.