Slow domestic demand growth and overcapacity will numb the impact on Indian steelmakers from a floor price just imposed on steel product imports to stem inflows from China, Fitch Ratings said on Thursday.
India set a floor price on imports of 173 steel products on February 5, the first time it has taken such a step in more than 15 years, to deter mainly China from undercutting local mills.
The move should allow Indian steel producers to raise prices on most of their products by around USD 50 - USD 70 a tonne, Fitch said.
"However, producers are unlikely to realise price increases of this much because of competition ... and weak demand," the ratings agency said.
Producers have only lifted prices by around USD 10 - USD 15 a tonne since the government's announcement, Fitch added.
While India's steel production could rise by around 3-4 percent as imports drop, Fitch said capacity utilisation levels among steel producers are not expected to rise significantly as new capacities come online this year.
"We believe that further steel price increases and a significant improvement in steel producers' profitability will depend on a strong revival in domestic demand growth," Fitch said, with more government spending on infrastructure key to boosting steel consumption growth.
India was the world's No. 3 steel producer last year, with output of nearly 90 million tonnes. It was the only producer among the world's top 10 whose output grew from the previous year, based on data from the World Steel Association.
China, which accounts for half the world's steel output at just over 800 million tonnes, exported a record high 112.4 million tonnes of steel last year as mills shipped out surplus output to cope with shrinking domestic demand.
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