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Mumbai, Jan. 28 Global rating agency Fitch in its ‘Outlook for 2008’ has assigned a stable rating for the Indian steel industry sector.

Fitch expects steel demand to grow at 8-9 per cent in 2008, driven by a strong domestic economy with increased spending on infrastructure, real estate and corporate capex. Consequently, reliance on external trade will remain marginal.

The rating agency expects prices to increase in most markets, including India in 2008, driven by strong consumption trends in Brazil, Russia, China, India and West Asia, which would offset the weakness in the US.

However, raw material costs were expected to increase, which could lead to compression in EBITDA margins of most companies in India.

Although globally the industry will continue to consolidate further, Fitch does not expect any material consolidation to happen in the Indian steel industry.

The trend for Indian companies to seek to diversify their risk profiles into developed markets may continue, although much more slowly than in 2007, it said.

With both demand and prices remaining firm, cash generation from operations is expected to remain strong in 2008, particularly for manufacturers with considerable in-house raw material links.

Fitch expects most of the companies to generate negative free cash flow in 2008 with leverage higher than in 2007.

However, credit profiles should remain broadly stable for most steel manufacturers, it said.

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