Fitch Ratings has downgraded the rating headroom for India’s steel giants, JSW Steel Limited and Tata Steel Limited, due to the challenges posed by cheap steel imports from China and the potential impact of aggressive tariff policies from various economies, including the US. The agency expects domestic steel prices to come under pressure in the financial year ending March 2026. JSW Steel’s current rating stands at BBB-/Negative, while Tata Steel’s is at BB/Stable.
Fitch expects both companies to breach their negative sensitivity thresholds for EBITDA leverage in FY25, with JSW surpassing 3.7x and Tata exceeding 3.0x. The outlook for FY26 remains bleak, with expectations of continued margin pressures. However, Fitch expects some recovery due to sustained domestic demand growth, a decline in key input costs, and China’s efforts to cut steel production.
To mitigate these challenges, Fitch notes that both companies have the flexibility to defer certain capital expenditures, creating financial buffers. The agency forecasts that both companies may return to mid-cycle margin levels by FY27, contingent upon the resolution of current pressures. However, sustained margin weakness is a key risk to the ratings. Tata Steel is also grappling with execution risks linked to the restructuring of its European operations, making it more vulnerable to state mining taxes.
A potential lifeline for the steel giants is the possibility of Indian government measures to shield domestic steelmakers from cheaper imports, such as imposing anti-dumping duties, which could positively affect their margin projections. The agency notes that the timing and scale of such measures remain uncertain and will depend on the government’s efforts to balance the interests of steelmakers and consumers. India’s steel demand is expected to grow by around 10% in FY26, driven by robust public spending and demand from the construction, infrastructure, and manufacturing sectors.